Posted by
Javit Hafizoglu on
URL: http://quantlib.414.s1.nabble.com/Generalized-Hull-White-model-problems-tp12503p12510.html
I updated the generalized Hull White model and performed tests with QL-1.0.1. Tests are successful. For some reason calibration takes longer now. In the BermudanSwaption.cpp, I changed the optimization end criteria down to 40 and 10 from 400 and 100 for the max iteration and stationary iterations. This way, it takes shorter to calibrate.
I attached the files. The changes:
-- For some reason, parameter.hpp in QL-1.0.1 is not the same as trunk version 17224. The trunk version is the correct one except the line
145 : Parameter(times.size()+1,
where the “+1” should go away.
-- The changes in GHW classes are only at the lines where a PiecewiseConstantParameter class is initiated. The new parameter.hpp accepts constraints at the initialization. I imposed positive constraints for both the a_ and sigma_ parameters in the model.
Here are my suggestions:
-- Update the parameter.hpp in QL-1.0.1 as above.
-- Update the GHW model files with the ones attached.
-- The BermudanSwaption.cpp test file can be modified as the one I attached to include the GHW test in the test-suite.
The BermudanSwaption.cpp output from my laptop is below. I look forward to your comments.
Thank you,
Javit
G2 (analytic formulae) calibration
1x5: model 10.05475 %, market 11.48000 % (-1.42525 %)
2x4: model 10.48803 %, market 11.08000 % (-0.59197 %)
3x3: model 10.67504 %, market 10.70000 % (-0.02496 %)
4x2: model 10.83340 %, market 10.21000 % (+0.62340 %)
5x1: model 10.98264 %, market 10.00000 % (+0.98264 %)
calibrated to:
a = 0.099851, sigma = 0.010545
b = 0.099851, eta = 0.010545
rho = -0.74998
Hull-White (analytic formulae) calibration
1x5: model 11.87889 %, market 11.48000 % (+0.39889 %)
2x4: model 11.76594 %, market 11.08000 % (+0.68594 %)
3x3: model 11.87495 %, market 10.70000 % (+1.17495 %)
4x2: model 11.88579 %, market 10.21000 % (+1.67579 %)
5x1: model 11.85322 %, market 10.00000 % (+1.85322 %)
calibrated to:
a = 0.10014, sigma = 0.0076919
Hull-White (numerical) calibration
1x5: model 10.31044 %, market 11.48000 % (-1.16956 %)
2x4: model 10.50842 %, market 11.08000 % (-0.57158 %)
3x3: model 10.62836 %, market 10.70000 % (-0.07164 %)
4x2: model 10.71895 %, market 10.21000 % (+0.50895 %)
5x1: model 10.81202 %, market 10.00000 % (+0.81202 %)
calibrated to:
a = 0.10014, sigma = 0.006877
Black-Karasinski (numerical) calibration
1x5: model 12.85815 %, market 11.48000 % (+1.37815 %)
2x4: model 13.11871 %, market 11.08000 % (+2.03871 %)
3x3: model 13.25333 %, market 10.70000 % (+2.55333 %)
4x2: model 13.33942 %, market 10.21000 % (+3.12942 %)
5x1: model 13.43137 %, market 10.00000 % (+3.43137 %)
calibrated to:
a = 0.08249, sigma = 0.1667
Generalized Hull-White calibration
1x5: model 11.16996 %, market 11.48000 % (-0.31004 %)
2x4: model 11.15188 %, market 11.08000 % (+0.07188 %)
3x3: model 10.87750 %, market 10.70000 % (+0.17750 %)
4x2: model 10.42011 %, market 10.21000 % (+0.21011 %)
5x1: model 9.78110 %, market 10.00000 % (-0.21890 %)
parameter[0] =, 0.04
parameter[1] =, 0.37449
parameter[2] =, 0.084144
parameter[3] =, 0.1
parameter[4] =, 0.24785
parameter[5] =, 0.053831
Payer bermudan swaption struck at 5.00000 % (ATM)
Generalized HW: 14.515
G2: 14.549
HW: 15.005
HW (num): 13.404
BK: 16.457
Payer bermudan swaption struck at 6.00000 % (OTM)
Generalized HW: 3.671
G2: 3.4158
HW: 3.6088
HW (num): 2.6985
BK: 5.6241
Payer bermudan swaption struck at 4.00000 % (ITM)
Generalized HW: 42.622
G2: 42.838
HW: 43.154
HW (num): 42.52
BK: 42.998
Run completed in 15 m 31 s
Press any key to continue . . .
Alexander Lotter wrote
Javit Hafizoglu wrote
I'm relocating. Lots of things to do. I'm planning to finish this update by the end of June.
Hi Javit,
Great. I could assist you by tests. Just let me know, if you need any help.
Take care
Alex
GHW.rar