Barrier option greeks

[Siddharth Sharma-3]

Hello,
 Is it true that the AnalyticBarrierEngine in QuantLib
0.3.8 doesn't have any support for greeks, or am I
somehow mistaken? If greeks are to be implemented,
what would be the best way of doing it?

thanks and regards
Sid





               
__________________________________________________________
How much free photo storage do you get? Store your friends 'n family snaps for FREE with Yahoo! Photos http://in.photos.yahoo.com

[cuchulainn]

Maybe you could modify Quantlib FDM schemes to handle greeks. It's fairly easy.

 

Just take divided diference of price to get delta. I have done it and its OK.

 

Daniel

---

From: [hidden email] on behalf of Siddharth Sharma
Sent: Thu 23/06/2005 13:21
To: [hidden email]
Subject: [Quantlib-users] Barrier option greeks

Hello,
 Is it true that the AnalyticBarrierEngine in QuantLib
0.3.8 doesn't have any support for greeks, or am I
somehow mistaken? If greeks are to be implemented,
what would be the best way of doing it?

thanks and regards
Sid





               
__________________________________________________________
How much free photo storage do you get? Store your friends 'n family snaps for FREE with Yahoo! Photos http://in.photos.yahoo.com


-------------------------------------------------------
SF.Net email is sponsored by: Discover Easy Linux Migration Strategies
from IBM. Find simple to follow Roadmaps, straightforward articles,
informative Webcasts and more! Get everything you need to get up to
speed, fast. http://ads.osdn.com/?ad_id=7477&alloc_id=16492&op=click
_______________________________________________
Quantlib-users mailing list
[hidden email]
https://lists.sourceforge.net/lists/listinfo/quantlib-users

[Luigi Ballabio]

On 06/23/2005 06:55:26 PM, Daniel J. Duffy wrote:
> Maybe you could modify Quantlib FDM schemes to handle greeks. It's  
> fairly easy. Just take divided diference of price to get delta. I  
> have done it and its OK.

That is a possibility---and indeed, delta and gamma are calculated in  
this way in all finite-difference engines---but one would have to write  
a FD engine for Barrier options first, which is missing at this time.

As to the current analytic engine, one could write down the implemented  
formula and derive it; it's a bit of tedious work, but possible. After  
one's done that, one'd just assign the corresponding variable, as in:

results_.value = C(1,1) + E(1);  // an existing switch case
results_.delta = (the expression one found);

in every switch and if clause.

Alternatively, a numerical estimate can be obtained by calculating the  
analytic prices P1 and P2 for underlying prices (u0 - du) and (u0 +  
du), respectively, where du is a small increment and approximate delta  
as (P2-P1)/(2*du). (Daniel, was this what you were suggesting?)

Later,
        Luigi

----------------------------------------

Prediction is very difficult, especially if it's about the future.
-- Niels Bohr

[cuchulainn]

If you have FDM for plain optons then barriersa are even easier because we have Dirichlet BC and no far field ..

 

regards

 

Daniel

---

From: Luigi Ballabio [mailto:[hidden email]]
Sent: Fri 24/06/2005 12:51
To: Daniel J. Duffy
Cc: Siddharth Sharma; [hidden email]
Subject: Re: [Quantlib-users] Barrier option greeks

On 06/23/2005 06:55:26 PM, Daniel J. Duffy wrote:
> Maybe you could modify Quantlib FDM schemes to handle greeks. It's 
> fairly easy. Just take divided diference of price to get delta. I 
> have done it and its OK.

That is a possibility---and indeed, delta and gamma are calculated in 
this way in all finite-difference engines---but one would have to write 
a FD engine for Barrier options first, which is missing at this time.

As to the current analytic engine, one could write down the implemented 
formula and derive it; it's a bit of tedious work, but possible. After 
one's done that, one'd just assign the corresponding variable, as in:

results_.value = C(1,1) + E(1);  // an existing switch case
results_.delta = (the expression one found);

in every switch and if clause.

Alternatively, a numerical estimate can be obtained by calculating the 
analytic prices P1 and P2 for underlying prices (u0 - du) and (u0 + 
du), respectively, where du is a small increment and approximate delta 
as (P2-P1)/(2*du). (Daniel, was this what you were suggesting?)

Later,
        Luigi

----------------------------------------

Prediction is very difficult, especially if it's about the future.
-- Niels Bohr

[Gary Kennedy]

I have seen automatic differentiation used once an analytic library to
avoid the tedious derivation of the barrier greeks by hand, and
managing the resulting code. I thought it quite elegant, but care
needed to be taken to avoid roundoff errors and also performance
problems when too many objects were instantiated.

Gary


On 6/24/05, Luigi Ballabio <[hidden email]> wrote:

>
> On 06/23/2005 06:55:26 PM, Daniel J. Duffy wrote:
> > Maybe you could modify Quantlib FDM schemes to handle greeks. It's
> > fairly easy. Just take divided diference of price to get delta. I
> > have done it and its OK.
>
> That is a possibility---and indeed, delta and gamma are calculated in
> this way in all finite-difference engines---but one would have to write
> a FD engine for Barrier options first, which is missing at this time.
>
> As to the current analytic engine, one could write down the implemented
> formula and derive it; it's a bit of tedious work, but possible. After
> one's done that, one'd just assign the corresponding variable, as in:
>
> results_.value = C(1,1) + E(1);  // an existing switch case
> results_.delta = (the expression one found);
>
> in every switch and if clause.
>
> Alternatively, a numerical estimate can be obtained by calculating the
> analytic prices P1 and P2 for underlying prices (u0 - du) and (u0 +
> du), respectively, where du is a small increment and approximate delta
> as (P2-P1)/(2*du). (Daniel, was this what you were suggesting?)
>
> Later,
>         Luigi
>
> ----------------------------------------
>
> Prediction is very difficult, especially if it's about the future.
> -- Niels Bohr
>
>
>
> -------------------------------------------------------
> SF.Net email is sponsored by: Discover Easy Linux Migration Strategies
> from IBM. Find simple to follow Roadmaps, straightforward articles,
> informative Webcasts and more! Get everything you need to get up to
> speed, fast. <a href="http://ads.osdn.com/?ad_idt77&alloc_id492&opclick">http://ads.osdn.com/?ad_idt77&alloc_id492&opclick
> _______________________________________________
> Quantlib-users mailing list
> [hidden email]
> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>