Re: problems with localVolImpl

Posted by Luigi Ballabio on
URL: http://quantlib.414.s1.nabble.com/problems-with-localVolImpl-tp11681p11682.html

Hi Paulius,

On Mon, 2008-02-18 at 13:01 +0000, Paulius Jakubenas wrote:

> When getting a local volatility from implied volatility via
> localVolImpl() (for example using a Monte Carlo simulation),
> from time to time one is given a negative local volatility (which
> generates an exception - as expected).
> The problem often arises  from small numerical inaccuracies which get
> augmented when numerically calculating the second derivative.
>
> Has anyone  already encountered and resolved the problem?
> If not, I'd like to contribute a fix to the library. This would mean
> changing the interface s.t. the
> LocalVolTermStructure::localVolImpl method returns a discretized vol -
> not an instantaneous vol.

I'm not sure that I'm following. What would the discretized vol be?

Later,
        Luigi


--

Don't let school get in the way of your education.
-- Mark Twain



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