http://quantlib.414.s1.nabble.com/Quant-advice-for-a-newbie-trying-to-learn-Heston-model-calibration-via-QuantLib-tp14662p14664.html
just catching up this thread.
> Hi Paul,
>
>
>
> technically speaking, QuantLib Date and DayCounter classes support "Days" as
> smallest granularity.
>
>
>
> Given the fact that the Heston model has many shortcomings in practical
> usage, the missing hourly resolution is really a minor problem for the
> calibration (...and IMO the error almost cancels out because the
> Black-Scholes reference price is also calculated using the same day
> counter).
>
>
>
> The missing resolution becomes a problem if one e.g. tries to calculate the
> "pin" risk for an ATM option a few hours before expiry.
>
>
>
>
>
> regards
>
> Klaus
>
>
>
> On Friday, November 15, 2013 01:49:43 AM Paul Cao wrote:
>
> Hi Everyone,
>
>
> Thanks for being on this mailing-list and supporting users like me and to
> better the community. QuantLib has really helped me in not only having a
> useful library but also helped me understand some of the models in the
> library via the code; I'm not as strong as some of you in "groking" the
> formal steps of say, Heston, Black-Scholes in mathematical notations
> step-by-step but with the help of QuantLib's source, it has helped me in
> following along the derivation and the logic.
>
>
> I have a question about the Heston model calibration in QuantLib, AFAIK, to
> calibrate a option pricing model,
>
>
> 1) Use the QuantLib::CalibrateModel::calibrate method on the model of your
> choice (e.g., Heston)
>
>
http://quantlib.sourcearchive.com/documentation/1.1-1/classQuantLib_1_1HestonModel.html>
>
>
http://quantlib.sourcearchive.com/documentation/1.1-1/classQuantLib_1_1CalibratedModel_ab3876cc20f2a7dd368789e5f6960707c.html#ab3876cc20f2a7dd368789e5f6960707c>
>
> 2) Pass into the calibrate method a collection of CalibrationHelper
>
>
>
http://www.pkill.info/linux/man/3-HestonModelHelper/>
>
> Which is essentially a collection of actual option prices with strikes and
> expiry for the chosen optimization algorithm to search and converge on. The
> Heston Model takes in 4 parameters, so the optimizer would presumably
> iterate by varying the initial parameters based on the derived pricing
> compared to actual pricing until they converges close enough.
>
>
> 3) Choose the desired optimization algorithm steps, and acceptable
> constraint/error range.
>
>
> However, what I *don't* understand is why the calibration helper's maturity
> argument's time resolution is only up to day and not minute or hourly bars.
>
>
> e.g.,
>
>
> HestonModelHelper(const Period &maturity...) where Period has a TimeUnit
> type which is a enum of {Days, Weeks, Months, Years}. Now, under regular BSM
> model and option prices in general, option pricing is sensitive to time
> resolution of expiration down to minutes especially on the day of expiration
> due to increasing theta decay.
>
>
> So I'm not understanding why the CalibrationHelper class constructor only
> takes in the Day resolution to calculate the theoretical option price.
> Perhaps I'm missing something, I understand that Heston model models only
> the volatility; so perhaps the pricing calculation based off it still
> require the other parameters. But unfortunately, I'm unable to figure it out
> via the sample code or the QuantLib references,
>
>
> If anyone can pinpoint me to my misunderstandings and how calibration really
> works, I'd greatly appreciated; thanks again for everyone's help and
> support,
>
>
> Best,
>
> Paul Cao
>
>
>
>
>
>
>
>
>
>
>
> ------------------------------------------------------------------------------
> DreamFactory - Open Source REST & JSON Services for HTML5 & Native Apps
> OAuth, Users, Roles, SQL, NoSQL, BLOB Storage and External API Access
> Free app hosting. Or install the open source package on any LAMP server.
> Sign up and see examples for AngularJS, jQuery, Sencha Touch and Native!
>
http://pubads.g.doubleclick.net/gampad/clk?id=63469471&iu=/4140/ostg.clktrk> _______________________________________________
> QuantLib-users mailing list
>
[hidden email]
>
https://lists.sourceforge.net/lists/listinfo/quantlib-users>
Free app hosting. Or install the open source package on any LAMP server.