QuantLib › quantlib-users

Heston Model Code in test suite

Classic

List

Threaded

2 messages Options

Theo Boafo

Heston Model Code in test suite

Hi,

I copied the code below for heston model in test-suite into a separate project and run it in debug,

The initial heston parameters, which I think are initial guesses do not change after model calibation. ie when I check say kappa value via model->kappa(), its value is the same as before. Am I missing something here.

Also the check for feller condition being satisfied ie 2kappa*theta > vol of vol * vol of vol, does it apply to the initial guess parameters?

Regards

Theo

void HestonModelTest::testDAXCalibration() {

BOOST_TEST_MESSAGE(

"Testing Heston model calibration using DAX volatility data...");

SavedSettings backup;

Date settlementDate(5, July, 2002);

Settings::instance().evaluationDate() = settlementDate;

CalibrationMarketData marketData = getDAXCalibrationMarketData();

const Handle<YieldTermStructure> riskFreeTS = marketData.riskFreeTS;

const Handle<YieldTermStructure> dividendTS = marketData.dividendYield;

const Handle<Quote> s0 = marketData.s0;

const std::vector<boost::shared_ptr<CalibrationHelper> > options

= marketData.options;

const Real v0=0.1;

const Real kappa=1.0;

const Real theta=0.1;

const Real sigma=0.5;

const Real rho=-0.5;

boost::shared_ptr<HestonProcess> process(new HestonProcess(

riskFreeTS, dividendTS, s0, v0, kappa, theta, sigma, rho));

boost::shared_ptr<HestonModel> model(new HestonModel(process));

boost::shared_ptr<PricingEngine> engine(

new AnalyticHestonEngine(model, 64));

for (Size i = 0; i < options.size(); ++i)

options[i]->setPricingEngine(engine);

LevenbergMarquardt om(1e-8, 1e-8, 1e-8);

model->calibrate(options, om, EndCriteria(400, 40, 1.0e-8, 1.0e-8, 1.0e-8));

------------------------------------------------------------------------------
CenturyLink Cloud: The Leader in Enterprise Cloud Services.
Learn Why More Businesses Are Choosing CenturyLink Cloud For
Critical Workloads, Development Environments & Everything In Between.
Get a Quote or Start a Free Trial Today.
http://pubads.g.doubleclick.net/gampad/clk?id=119420431&iu=/4140/ostg.clktrk
_______________________________________________
QuantLib-users mailing list
[hidden email]
https://lists.sourceforge.net/lists/listinfo/quantlib-users

Klaus Spanderen-2

Re: Heston Model Code in test suite

if I'm adding the following lines after the calibrate method

std::cout << "v0 : " << model->v0() << std::endl

<< "kappa: " <<model->kappa() << std::endl

<< "theta: " <<model->theta() << std::endl

<< "sigma: " <<model->sigma() << std::endl

<< "rho : " <<model->rho() << std::endl;

then I'm getting the expected result

v0 : 0.195662

kappa: 15.6628

theta: 0.0745911

sigma: 3.3619

rho : -0.511493

The Feller constraint is only applied if you add an instance of the class FellerConstraint to the calibrate call, e.g.

model->calibrate(options, om, EndCriteria(400, 40,

1.0e-8, 1.0e-8,1.0e-8),

HestonModel::FellerConstraint());

can you please send a copy of your standalone program?

regards

Klaus

On Thursday, January 23, 2014 11:28:21 AM Theo Boafo wrote:

Hi,