Posted by
Luigi Ballabio on
Nov 29, 2013; 9:26am
URL: http://quantlib.414.s1.nabble.com/juquadraticengine-errors-tp14681p14682.html
Hi Fabien,
thanks for the heads-up. Do you have a patch for the code?
Luigi
On Thu, Nov 28, 2013 at 3:50 PM, Fabien Le Floc'h <
[hidden email]> wrote:
> Hello,
>
> I noticed a few errors in juquadraticengine.cpp regarding the greeks:
> - the delta and gamma should be computed differently if the option is
> exercised early (a special case just like the results._value case).
> - the delta formula is wrong (the paper formula is wrong as well), it needs
> to use d1(S) and not d1(S*) (called d1_Sk in quantlib).
> - the gamma formula is wrong for the same reasons. And there is an
> additional coding error, the term '+ lambda * (1 - lambda) / (spot * spot *
> (1 - chi)))' should be ' + lambda * (lambda-1) / (spot * spot * (1 - chi)))'
> according to the paper.
>
> It can be easily verified numerically that the greeks obtained by the
> current code are completely nonsensical. After those fixes, they are good
> (see attached doc).
>
>
>
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