public:daily range accruals: tree pricing
Hi,
I am trying to implement the pricing of daily range accruals in the QL implementation of trees, i.e. using a class derived from DiscretizedAsset.
Unless one does not want to use a number of time nodes greater or equal than the number of fixings, (and consequently he will keep on waiting for the rest of his life until he gets a price), it should be necessary to introduce some kind of approximations or interpolations.
My first approach was to approximate the instrument's price by assuming that between 2 adjacent time nodes the implied forwards were all equal to the forward seen in one of the 2 adjacent times. This gives an acceptable accuracy in the pricing, but the accuracy is not enough for calculating the delta vector, which is highly unstable.
A more accurate approache could be to evaluate the forwards on both the adjacent time nodes, and obtaining a result by "interpolation". Is there anybody friendly with trees (and especially with QL implementation...), and willing to suggest me how to implement it?
Francesco
############################### DISCLAIMER #################################
This message (including any attachments) is confidential and may be
privileged. If you have received it by mistake please notify the sender by
return e-mail and delete this message from your system. Any unauthorised
use or dissemination of this message in whole or in part is strictly
prohibited. Please note that e-mails are susceptible to change. Banca del
Gottardo (including its group companies) shall not be liable for the
improper or incomplete transmission of the information contained in this
communication nor for any delay in its receipt or damage to your system.
Banca del Gottardo (or its group companies) does not guarantee that the
integrity of this communication has been maintained nor that this
communication is free of viruses, interceptions or interference.
############################################################################
Locked
