Patches item #2783225, was opened at 2009-04-28 23:40
Message generated for change (Comment added) made by lballabio
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Category: None
Group: None
>Status: Closed
>Resolution: Accepted
Priority: 5
Private: No
Submitted By: Michael Heckl (heckl)
>Assigned to: Luigi Ballabio (lballabio)
Summary: EnhancedBlackScholesProcess that supports vega stresstests
Initial Comment:
This BlackScholes Process takes 5 extra arguments which define a square of the local volatility surface that is stressed by a configurable stress-level.
You can also use this process for local vol curve stress tests. The solution is quite easy but very very helpful. I did lots of testing on it and it works perfectly. Especially for examining where (what moneyness and what time bucket) the vega sensitivities are at path dependent asian options you can do wonderful stresstests with monte carlo. This is because it is not always wanted to stress the implied surface (since this could cause smoothness problems), but also to stress the local volatility surface. There is no other option to do this so far. That is why i developed this process.
Check it out. I can also provide some test cases that demonstrate the tremendous usefulness of this process.
Greetings,
Michael
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>Comment By: Luigi Ballabio (lballabio)
Date: 2010-11-19 15:57
Message:
Sorry it took so long. Your code is now in the <ql/experimental/processes>
folder.
I renamed the class for clarity and inherited it from the
GeneralizedBlackScholesProcess class so that it can be used with the rest
of the library.
Thanks for the contribution.
Luigi
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