Some thoughts on MC
Hi all,
I recently ran into some troubles using the quantlib MC pricing classes.
1. stochasticprocess: drift and diffusion are currently timestep independent. For instance, providing the timestep could lead to a more accurate drift, as already stated in blackscholesprocess.hpp. Is there something preventing the implementation of this idea by adding a third parameter "dt" in the drift and diffusion prototype in stochasticprocess.hpp ?
Should I send a code submission for this ?
2. Use of historical data for path dependent pricing in MC. I read in the TODO page that negative values usage in the TimeGrid class should be investigated. While I thought of using negative values in the TimeGrid at first for historical data, I finally decided not to do it because TimeGrid seemed to be oriented toward the MC simulation process involving the path *generators*. Therefore, I decided to take historical data into account in the PathPricer class by merging the historical data and generated path into a homemade class. The passing of historical data to the path pricer is made through derived Instrument::arguments classes. The solution I implemented is still a a very early devlopment stage but could be separated as follows: the use of a historical class for historical process values (already exists: TimeSeries) and the use of a class that merge historical data and the generated Path/MultiPath class at the object construction.
Does this seem to be a good idea (or at least not too bad idea) ? Are there better ways to achieve this ?
Best regards,
Edmond
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