Subject: LMM. Caplet price dependence on initial numeraire value.

[Don Stewart-3]

Hi there,

 

I'm trying to understand the behaviour of the QuantLib implementation of the LMM. I observe that the caplet price

depends almost linearly on the value of the initial numeraire value, i.e., if I change the InitialNumeraire argument

passed to the AccountingEngine object I get a different set of caplet prices. Please see attached workbook which

displays the behaviour.

 

Is this behaviour correct? I would expect that the initial value of the numeraire should not affect the caplet price.

 

To produce this analysis, I built an LMM implementation in QuantLibXL (constant vol, Sobol generator). I had to expose some additional methods from QuantLib-1.0.0 in order to get prices out in QuantLibXL. I'm happy to provide the workbook and associated QuantLibXL-vc90-mt-s-1_0_0_4.xll used to produce LMM caplet prices to anyone interested. They occupy 15+Mb so I do not include them in this message.

 

Many thanks for your help.

 

Regards Don Stewart

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[mudcrab]

Hi,

I didn't actually see the implementation of the source code for the
example calibration in Section 13 of the Ametrano and Joshi paper
(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1092665) in the
repository.

Did I miss it, or if not, is this something that Nando or Mark could make
available?

Thanks.



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