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If the product is callable, then its value is equal to the
difference between the non-callable product and the "callability option". On
each call date, the callability option is worth as the maximum between (the
non-callable product - 100) and the callability option itself (i.e., the owner of the option has on each call date
the right to choose between either exercise or keep the
option)
So, the underlying is the range accrual itself. You don't
need MC simulations.
Hope it helps,
Francesco
Hi
Francesco,
Thx
very much!
Yes,
the daily range accrual note can be seen as series of
digital option, so we can price it in a tree
framework,
and the
callable feature can be seen as bermudan swaption, but note that it is
callable range note,
so the
swaption embedded is a swaption in which the fixed coupon leg is unknow at
first, that is the fixed coupon leg
on the swaption is path dependent,we should monte carlo the 6month
Libor rate, and determine the fixed coupon leg latter,
how can it be priced in the swaptionpricer class?
Attached you can find the concrete terms for the daily range
accrual swap.
Best
Le
Hi Le
the easiest way to price such
product is using a tree, and thanks to Quantlib I am successfully pricing,
managing and trading callable range notes and other callable products since
last year.
The only thing you have to do is to write the pricing code
(on the tree) for the digital options embedded in the structure, then sum
them up and apply the exercise conditions as already done in the
swaptionpricer class.
Unfortunately, I cannot show you this code for the time
being: so, good luck!
Francesco
-----Original Message-----
From: LE
Ruiqi [[hidden email]]
Sent: venerdì, 21 maggio 2004 04:58
To: [hidden email]
Subject: [Quantlib-users] Least Square MonteCarlo in Daily Range
Accrual
Hi All
Recently days, I am to price
the daily range accrual with early terminatin clause, since it is
pathdependent with bermudan feature, it should be priced using the Least
Square MonteCarlo, but unfortunately I found that the quantlib file for
least square method only applies to stock derivatives, not IR derivatives.
Am I right? Is there anyone can tell me how to implement the coding for IR
derivatives using the Least Square method? Thx a lot Best
Le
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