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Using local vol or Heston for MCBarrierEngine

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Theo Boafo

Using local vol or Heston for MCBarrierEngine

Hi Luigi/Quantlib,

In mcbarrierengine.hpp, the constructor

MCBarrierEngine(

const boost::shared_ptr<GeneralizedBlackScholesProcess>& process,

Size timeSteps,

Size timeStepsPerYear,

bool brownianBridge,

bool antitheticVariate,

Size requiredSamples,

Real requiredTolerance,

Size maxSamples,

bool isBiased,

BigNatural seed);

only takes in GeneralizedBlackScholesProcess, If I want to use hestonprocess for this class also, it does not look possible?

It may be possible if base class stochastic process was passed instead then, perhaps both GeneralizedBlackScholesProcess and hestonprocess could be derived class objects could be passed. I may be wrong here, not really a c++ guru.

for example I would like to price a barrier option in monte carlo using say local vol, heston, bates and slv(stochastic local vol) processes and compare their pvs, how do I do it using MCBarrierEngine?

Regards

Theo

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cheng li

答复: Using local vol or Heston for MCBarrierEngine

As I quickly look through, it seems MCVanillaEngine will fit your purpose.

Regards,

Cheng

发件人: Theo Boafo [mailto:[hidden email]]
发送时间: 2014年1月15日 1:55
收件人: [hidden email]; "Luigi Ballabio <luigi.ballabio"@gmail.com
主题: [Quantlib-users] Using local vol or Heston for MCBarrierEngine

Hi Luigi/Quantlib,

In mcbarrierengine.hpp, the constructor

MCBarrierEngine(

const boost::shared_ptr<GeneralizedBlackScholesProcess>& process,

Size timeSteps,

Size timeStepsPerYear,

bool brownianBridge,

bool antitheticVariate,

Size requiredSamples,

Real requiredTolerance,

Size maxSamples,

bool isBiased,

BigNatural seed);

only takes in GeneralizedBlackScholesProcess, If I want to use hestonprocess for this class also, it does not look possible?

Regards

Theo

Luigi Ballabio

Re: Using local vol or Heston for MCBarrierEngine

In reply to this post by Theo Boafo

You could modify the class to take an instance of StochasticProcess, but:
1) you would also have to pass a discount curve; right now the
risk-free curve from the Black-Scholes process is used, but a process
doesn't always contain one;
2) The corresponding path pricer class takes a Path, since
Black-Scholes is a 1-D process. Heston is a 2-D process, so you would
have to switch to MultiPath in the path pricer and MultiPathGenerator
in the engine. You would also have to make assumptions about which of
the variables represents the stock price (you know it for Heston, but
now for a generic process).

To begin with, it might be easier to write a specific
McBarrierHestonEngine. That's what we did for European engines. Once
you have it, you can see if you can refactor and merge the two
different engines.

Luigi

On Tue, Jan 14, 2014 at 6:54 PM, Theo Boafo <[hidden email]> wrote:

> Hi Luigi/Quantlib,
>
> In mcbarrierengine.hpp, the constructor
> MCBarrierEngine(
> const boost::shared_ptr<GeneralizedBlackScholesProcess>&
> process,
> Size timeSteps,
> Size timeStepsPerYear,
> bool brownianBridge,
> bool antitheticVariate,
> Size requiredSamples,
> Real requiredTolerance,
> Size maxSamples,
> bool isBiased,
> BigNatural seed);
>
>
> only takes in GeneralizedBlackScholesProcess, If I want to use hestonprocess
> for this class also, it does not look possible?
>
> It may be possible if base class stochastic process was passed instead then,
> perhaps both GeneralizedBlackScholesProcess and hestonprocess could be
> derived class objects could be passed. I may be wrong here, not really a
> c++ guru.
>
> for example I would like to price a barrier option in monte carlo using say
> local vol, heston, bates and slv(stochastic local vol) processes and compare
> their pvs, how do I do it using MCBarrierEngine?
>
> Regards
>
> Theo
>
> ------------------------------------------------------------------------------
> 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
>

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Theo Boafo

Re: Using local vol or Heston for MCBarrierEngine

In reply to this post by Theo Boafo

Hi Luigi/Chen,

Many thanks for your response.  I would code a separate heston engine and then later try to refactor.

Regards

Theo