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Using Market Model in QuantLib

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Yannis

Using Market Model in QuantLib

Hi,

I am looking for code that demonstrates the usage of market models.

Is there anywhere in the test folder a piece of code that prices any kind of Instrument (i.e. an object the type of which derives from QuantLib::Instrument) based on a non-experimental, non-legacy Market Model?

For example, searching for a pricing example of a QuantLib::Swaption, I have only found code that makes use of QuantLib::LfmSwaptionEngine, which unfortunately is part of the legacy folder.

Thanks,

Ioannis

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Peter Caspers-4

Re: Using Market Model in QuantLib

Hi Ioannis,

no, there isn't. There are two Libor Market Model implementations and
the "non-legacy" one under ql/models/marketmodels requires instruments
to inherit from MarketModelMultiProduct. This interface is quite
different from QuantLib::Instrument, for example it is obviously
designed towards pricing in the specific model implementation.
Otherwise there is lots of example code for this e.g.

https://github.com/lballabio/QuantLib/blob/master/test-suite/marketmodel.cpp
https://github.com/lballabio/QuantLib/blob/master/Examples/MarketModels/MarketModels.cpp#L113

Is there a reason why you want the usual QuantLib instrument interface
(like e.g. you have an existing infrastructure with pluggable pricing
engines)?

Best Regards
Peter

On 29 December 2016 at 10:05, Yannis <[hidden email]> wrote:

> Hi,
>
> I am looking for code that demonstrates the usage of market models.
>
> Is there anywhere in the test folder a piece of code that prices any kind of
> Instrument (i.e. an object the type of which derives from
> QuantLib::Instrument) based on a non-experimental, non-legacy Market Model?
>
> For example, searching for a pricing example of a QuantLib::Swaption, I have
> only found code that makes use of QuantLib::LfmSwaptionEngine, which
> unfortunately is part of the legacy folder.
>
> Thanks,
>
> Ioannis
>
> ------------------------------------------------------------------------------
> Check out the vibrant tech community on one of the world's most
> engaging tech sites, SlashDot.org! http://sdm.link/slashdot
> _______________________________________________
> QuantLib-users mailing list
> [hidden email]
> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>

Yannis

Re: Using Market Model in QuantLib

Thanks for responding back Peter! It's comforting to know I am not the only one working tonight...

I have been sort of suspecting an answer along these lines, but I wanted to be sure that using the MarketModelMultiProduct was indeed the right way to go.

Looking at the code I understand that in order to price a bermudan swaption I must first create the appropriate MarketModelMultiProduct object that represents that swaption and then do what the function "simulate" in marketmodel.cpp does, namely use a MarketModelEvolver to generate a SequenceStatisticsInc object. If I am looking for the swaption's npv, that will then be given by stats.mean(), where stats is the generated SequenceStatisticsInc object.

Perfect! (If I understand it correctly).

Do you know by chance if there is any mapping function that maps an existing QuantLib::Swaption object to the corresponding MarketModelMultiProduct object?

Of' course I can write my own, but it wouldn't hurt if one was available already. I am asking, because I work already extensively with QuantLib::Swaption objects, which I would now like to price using the available market model apparatus.

Best regards and thanks a lot once more and a happy new year,

Ioannis

Peter Caspers <[hidden email]> schrieb am 18:35 Samstag, 31.Dezember 2016:

On 29 December 2016 at 10:05, Yannis <[hidden email]> wrote:

>
> ------------------------------------------------------------------------------
> Check out the vibrant tech community on one of the world's most
> engaging tech sites, SlashDot.org! http://sdm.link/slashdot
> _______________________________________________
> QuantLib-users mailing list
> [hidden email]
> https://lists.sourceforge.net/lists/listinfo/quantlib-users

Peter Caspers-4

Re: Using Market Model in QuantLib

Happy new year. Here is a European swaption implementation which could
be a starting point for you

https://github.com/lballabio/QuantLib/blob/master/ql/models/marketmodels/products/multistep/multistepswaption.hpp

I don't think there is a mapping from QuantLib::Swaption implemented
already. Maybe it would be nice to have a QuantLib::PricingEngine
(more specifically an engine inheriting from Swaption::engine) that
takes a MarketModel instance in its ctor and then (within the
calculate() method) creates a temporary MarketModelMultiProduct from
the QuantLib::Swaption arguments and wraps the whole LMM pricing as
you described it above.

Best Regards
Peter

On 31 December 2016 at 19:42, Yannis <[hidden email]> wrote:

> Thanks for responding back Peter! It's comforting to know I am not the only
> one working tonight...
>
> I have been sort of suspecting an answer along these lines, but I wanted to
> be sure that using the MarketModelMultiProduct was indeed the right way to
> go.
>
> Looking at the code I understand that in order to price a bermudan swaption
> I must first create the appropriate MarketModelMultiProduct object that
> represents that swaption and then do what the function "simulate" in
> marketmodel.cpp does, namely use a MarketModelEvolver to generate a
> SequenceStatisticsInc object. If I am looking for the swaption's npv, that
> will then be given by stats.mean(), where stats is the generated
> SequenceStatisticsInc object.
>
> Perfect! (If I understand it correctly).
>
> Do you know by chance if there is any mapping function that maps an existing
> QuantLib::Swaption object to the corresponding MarketModelMultiProduct
> object?
>
> Of' course I can write my own, but it wouldn't hurt if one was available
> already. I am asking, because I work already extensively with
> QuantLib::Swaption objects, which I would now like to price using the
> available market model apparatus.
>
> Best regards and thanks a lot once more and a happy new year,
>
> Ioannis
>
>
>
> Peter Caspers <[hidden email]> schrieb am 18:35 Samstag, 31.Dezember
> 2016:
>
>
> Hi Ioannis,
>
> no, there isn't. There are two Libor Market Model implementations and
> the "non-legacy" one under ql/models/marketmodels requires instruments
> to inherit from MarketModelMultiProduct. This interface is quite
> different from QuantLib::Instrument, for example it is obviously
> designed towards pricing in the specific model implementation.
> Otherwise there is lots of example code for this e.g.
>
> https://github.com/lballabio/QuantLib/blob/master/test-suite/marketmodel.cpp
> https://github.com/lballabio/QuantLib/blob/master/Examples/MarketModels/MarketModels.cpp#L113
>
> Is there a reason why you want the usual QuantLib instrument interface
> (like e.g. you have an existing infrastructure with pluggable pricing
> engines)?
>
> Best Regards
> Peter
>
> On 29 December 2016 at 10:05, Yannis <[hidden email]> wrote:
>> Hi,
>>
>> I am looking for code that demonstrates the usage of market models.
>>
>> Is there anywhere in the test folder a piece of code that prices any kind
>> of
>> Instrument (i.e. an object the type of which derives from
>> QuantLib::Instrument) based on a non-experimental, non-legacy Market
>> Model?
>>
>> For example, searching for a pricing example of a QuantLib::Swaption, I
>> have
>> only found code that makes use of QuantLib::LfmSwaptionEngine, which
>> unfortunately is part of the legacy folder.
>>
>> Thanks,
>>
>> Ioannis
>
>>
>>
>> ------------------------------------------------------------------------------
>> Check out the vibrant tech community on one of the world's most
>> engaging tech sites, SlashDot.org! http://sdm.link/slashdot
>> _______________________________________________
>> QuantLib-users mailing list
>> [hidden email]
>> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>
>>
>
>

Yannis

Re: Using Market Model in QuantLib

This is exactly what I had in mind. The existing setup is an aberration from the usual Instrument-Engine design and I don't know why.

But I am actually glad the hard work for the market model implementation has been done, even if one needs to adopt to the new interface.

Regards

Ioannis

Peter Caspers <[hidden email]> schrieb am 14:17 Montag, 2.Januar 2017:

On 31 December 2016 at 19:42, Yannis <[hidden email]> wrote:

Peter Caspers-4

Re: Using Market Model in QuantLib

I think it's mainly for speed optimisation and simplicity. For example
a single MultiProduct can represent several deals, and you can combine
them further using the CompositeProduct. The result is a "super-deal"
with the only purpose of feeding all the cashflows into a single
market model simulation pass. Also, within the market model machinery
you never see a DayCounter, Date and so on, all is (or has to be)
precomputed to doubles. There are no lazy objects, no observers (as
far as I know), and so on.

This has advantages, but is also less universal: If you for example
look into multisteptarn.cpp you can also see how the implementation
depends on the model and its resolution method, this representation
clearly wouldn't make sense for a Hull White PDE solver.

Anyway good luck for your adapter implementation, let us know how it goes.

Best Regards
Peter

On 2 January 2017 at 15:48, Yannis <[hidden email]> wrote:

> This is exactly what I had in mind. The existing setup is an aberration from
> the usual Instrument-Engine design and I don't know why.
>
> But I am actually glad the hard work for the market model implementation has
> been done, even if one needs to adopt to the new interface.
>
> Regards
> Ioannis
>
>
> Peter Caspers <[hidden email]> schrieb am 14:17 Montag, 2.Januar
> 2017:
>
>
> Happy new year. Here is a European swaption implementation which could
> be a starting point for you
>
> https://github.com/lballabio/QuantLib/blob/master/ql/models/marketmodels/products/multistep/multistepswaption.hpp
>
> I don't think there is a mapping from QuantLib::Swaption implemented
> already. Maybe it would be nice to have a QuantLib::PricingEngine
> (more specifically an engine inheriting from Swaption::engine) that
> takes a MarketModel instance in its ctor and then (within the
> calculate() method) creates a temporary MarketModelMultiProduct from
> the QuantLib::Swaption arguments and wraps the whole LMM pricing as
> you described it above.
>
> Best Regards
> Peter
>
>
> On 31 December 2016 at 19:42, Yannis <[hidden email]> wrote:
>> Thanks for responding back Peter! It's comforting to know I am not the
>> only
>> one working tonight...
>>
>> I have been sort of suspecting an answer along these lines, but I wanted
>> to
>> be sure that using the MarketModelMultiProduct was indeed the right way to
>> go.
>>
>> Looking at the code I understand that in order to price a bermudan
>> swaption
>> I must first create the appropriate MarketModelMultiProduct object that
>> represents that swaption and then do what the function "simulate" in
>> marketmodel.cpp does, namely use a MarketModelEvolver to generate a
>> SequenceStatisticsInc object. If I am looking for the swaption's npv, that
>> will then be given by stats.mean(), where stats is the generated
>> SequenceStatisticsInc object.
>>
>> Perfect! (If I understand it correctly).
>>
>> Do you know by chance if there is any mapping function that maps an
>> existing
>> QuantLib::Swaption object to the corresponding MarketModelMultiProduct
>> object?
>>
>> Of' course I can write my own, but it wouldn't hurt if one was available
>> already. I am asking, because I work already extensively with
>> QuantLib::Swaption objects, which I would now like to price using the
>> available market model apparatus.
>>
>> Best regards and thanks a lot once more and a happy new year,
>>
>> Ioannis
>>
>>
>>
>> Peter Caspers <[hidden email]> schrieb am 18:35 Samstag,
>> 31.Dezember
>> 2016:
>>
>>
>> Hi Ioannis,
>>
>> no, there isn't. There are two Libor Market Model implementations and
>> the "non-legacy" one under ql/models/marketmodels requires instruments
>> to inherit from MarketModelMultiProduct. This interface is quite
>> different from QuantLib::Instrument, for example it is obviously
>> designed towards pricing in the specific model implementation.
>> Otherwise there is lots of example code for this e.g.
>>
>>
>> https://github.com/lballabio/QuantLib/blob/master/test-suite/marketmodel.cpp
>>
>> https://github.com/lballabio/QuantLib/blob/master/Examples/MarketModels/MarketModels.cpp#L113
>>
>> Is there a reason why you want the usual QuantLib instrument interface
>> (like e.g. you have an existing infrastructure with pluggable pricing
>> engines)?
>>
>> Best Regards
>> Peter
>>
>> On 29 December 2016 at 10:05, Yannis <[hidden email]> wrote:
>>> Hi,
>>>
>>> I am looking for code that demonstrates the usage of market models.
>>>
>>> Is there anywhere in the test folder a piece of code that prices any kind
>>> of
>>> Instrument (i.e. an object the type of which derives from
>>> QuantLib::Instrument) based on a non-experimental, non-legacy Market
>>> Model?
>>>
>>> For example, searching for a pricing example of a QuantLib::Swaption, I
>>> have
>>> only found code that makes use of QuantLib::LfmSwaptionEngine, which
>>> unfortunately is part of the legacy folder.
>>>
>>> Thanks,
>>>
>>> Ioannis
>>
>>>
>>>
>>>
>>> ------------------------------------------------------------------------------
>>> Check out the vibrant tech community on one of the world's most
>>> engaging tech sites, SlashDot.org! http://sdm.link/slashdot
>>> _______________________________________________
>>> QuantLib-users mailing list
>>> [hidden email]
>>> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>>
>>>
>>
>>
>
>