G2 model calibration

[andrea loddo-2]

Hi,

Let us suppose that I would like to calibrate the G2 model by using the swap rate curve instead of caps or swaptions. The reason for that is that I am not interested in pricing any derivative but instead I just want to see how the model fits the swap rate curve.

I am just wondering whether this makes sense and whether it is possible to calibrate the model by using the existing technology and implementing a suitable class that derives from CalibrationHelper.

Thanks

Andrea

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[Luigi Ballabio]

On Wed, 2009-02-04 at 19:54 +0000, Andrea Loddo wrote:
> Let us suppose that I would like to calibrate the G2 model by using
> the swap rate curve instead of caps or swaptions. The reason for that
> is that I am not interested in pricing any derivative but instead I
> just want to see how the model fits the swap rate curve.

I think the model is built so that it fits the swap curve exactly, no
matter the values of the parameters.  Am I wrong?

Luigi


--

Steinbach's Guideline for Systems Programming:
Never test for an error condition you don't know how to handle.



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[Kim Kuen Tang]

Luigi Ballabio schrieb:
>
> I think the model is built so that it fits the swap curve exactly, no
> matter the values of the parameters.  Am I wrong?
>
>  
No you are right. The swap curve is totally determined by the
yieldcurve. If the phi function in the g2 model is bootstrapped to the
yield curve, then you are able to recover the yield curve by pricing a
zero coupon bound.

Cheers,

Kim Tang


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