FX exotics valuation in MUREX with smile

doublebarrier2000 · December 29th, 2004, 2:12 am

Hi.It seems that the fx exotics guys here do not trust MUREX's valuation of anything remotely exotic when a vol smile exists.Does anybody know or has had the same experience and can tell me why such a costly piece of software can't handle even simple barrier option valuation

zzbool · January 2nd, 2005, 3:53 pm

I'm working with Murex and the weakness of the software for FX and equity exotics with smile is about the calibration engine which doesn't exist at all (except for interest rates exotics). I think NumeriX is partnering with Murex and you can get decent calibration procedures from NumeriX librairies, but you'll have to pay extra money for that. So if you're only getting the basic Murex, then your exotics guys are right not to trust Murex when dealing with vol smile or vol surfaces.

MaTT · January 4th, 2005, 7:26 am

hi guys, could you write more about this problem, ie. what do you mean by "can't handle even simple barrier option valuation" and "for FX and equity exotics (...) calibration engine which doesn't exist at all".... Regards,MaTT

jschnaz · January 12th, 2005, 3:51 pm

Hi,I know that they can plug smile models for FX exotics on demand, at least we're currently testing a DVega kind of model on our desk, which wasn't in the original stuff... It seems there are also working on a Heston and an hybrid model, but I didn't have a chance to look at it yet !!TChuss