First, make sure you reproduce 6 digits of the example in Kahl & Jackel's Not so complex logarithms article.Second, there are many ways to solve these kinds of problems -- so implement a few more of them. Third, test all the extreme cases: what if V(0) = 0, or the mean reversion is zero, or the vol-of-var is 0, very small or very large, or T is very small or large, or |rho| =1. Did your code break?
Last edited by Alan
on March 10th, 2010, 11:00 pm, edited 1 time in total.