Re: Local Vol

Posted by Theo Boafo on Dec 16, 2012; 12:00pm
URL: http://quantlib.414.s1.nabble.com/Re-QuantLib-dev-Digest-Vol-78-Issue-12-tp13755p13809.html

Whilst on the subject, in cases where you don't have a very smooth and well defined BS volatility surface, what do you do?

Sent from my iPad

On 16 Dec 2012, at 17:19, "Simon Ibbotson" <[hidden email]> wrote:

I have an implementation on Andreason's method for generating no-arbitrage local vol surfaces. I will submit it into QuantLib after New Years...

---

From: Klaus Spanderen <[hidden email]>
To: Luigi Ballabio <[hidden email]>; Theo Boafo <[hidden email]>
Cc: [hidden email] <[hidden email]>
Sent: Fri Dec 14 14:44:51 2012
Subject: Re: [Quantlib-dev] Local Vol

Hi

 

The implementation is based on the original Dupire formula and therefore works only if you have a very "smooth" and well-defined BS volatility surface.  The test case 

 

BarrierOptionTest :: testLocalVolAndHestonComparison ()

 

shows a usage of it.

 

This algorithm

 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1694972

 

might be helpful to generate "smooth" volatility surfaces.

 

cheers

 Klaus

 

But then is seems to work,
Luigi Ballabio <[hidden email]> hat am 14. Dezember 2012 um 12:01 geschrieben:

> Hi,
> the LocalVolSurface is what we have. It's not overly tested,
> though, so it would be great if anyone tried it out and reported.
>
> Luigi
>
>
> On Wed, Dec 12, 2012 at 3:43 PM, Theo Boafo <[hidden email]> wrote:
> > Hi All,
> >
> > Do we have an implementation of Local Vol in Quantlib? I see a LocalVol
> > surface but does not seem like its used.
> >
> > Regards
> >
> > Theo
>
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