Finite difference method for SABR

bassemus49 · February 14th, 2014, 8:10 pm

Does anyone know where to find VBA-code for a finite difference method approach on options pricing using the SABR model?

Cuchulainn · February 15th, 2014, 4:38 am

http://www.wilmott.com/messageview.cfm? ... SGDBTABLE=

bassemus49 · February 16th, 2014, 11:24 am

Thank you for replying. I am pretty new into numerical methods and the SABR method. Can you recommend a document discussing a finite difference method approach using SABR model (not too complex) and preferable some VBA code?

Cuchulainn · February 16th, 2014, 1:13 pm

QuoteI am pretty new into numerical methods and the SABR method. Why in that case are you jumping into SABR pde? It's like a nurse wanting to become a surgeon in one go???

Cuchulainn · February 16th, 2014, 1:16 pm

QuoteI am pretty new into numerical methods and the SABR method. Why in that case are you jumping into SABR pde? It's like a nurse wanting to become a surgeon in one go???I posted a link; maybe someone will oblige.Have a look at Roelof Sheppard's thesis on Heston .. he has the algos but it would be up to you to program them in VBA. Just giving people code is cheating IMO.

Cuchulainn · February 17th, 2014, 7:56 am

QuoteOriginally posted by: bassemus49Does anyone know where to find VBA-code for a finite difference method approach on options pricing using the SABR model?May I ask if this is (part of) an MSc/MFE thesis write-up?

andcoo01 · February 19th, 2014, 6:45 pm

There was a related question on Another thread but I will give the same answer:I would highly recommend reading "Interest Rate Modeling. Volume 1: Foundations and Vanilla Models" by Leif B. G. Andersen and Vladimir V. Piterbarg to get a good understanding of stochastic volatility models and pde methods. pde pricers for stochastic volatility are explained very well and concisely in Chapter 2.

logos01 · March 19th, 2014, 10:57 am

There is matlab code in Finite Difference Techniques for Arbitrage Free SABR