Re: Heston Model Code in test suite

Posted by Klaus Spanderen-2 on Jan 23, 2014; 9:13pm
URL: http://quantlib.414.s1.nabble.com/Heston-Model-Code-in-test-suite-tp14891p14892.html

Hi

 

if I'm adding the following lines after the calibrate method

 

std::cout << "v0 : " << model->v0() << std::endl

<< "kappa: " <<model->kappa() << std::endl

<< "theta: " <<model->theta() << std::endl

<< "sigma: " <<model->sigma() << std::endl

<< "rho : " <<model->rho() << std::endl;

 

then I'm getting the expected result

 

v0 : 0.195662

kappa: 15.6628

theta: 0.0745911

sigma: 3.3619

rho : -0.511493

 

The Feller constraint is only applied if you add an instance of the class FellerConstraint to the calibrate call, e.g.

 

model->calibrate(options, om, EndCriteria(400, 40,

1.0e-8, 1.0e-8,1.0e-8),

HestonModel::FellerConstraint());

 

 

can you please send a copy of your standalone program?

 

regards

Klaus

 

On Thursday, January 23, 2014 11:28:21 AM Theo Boafo wrote:

Hi,

I copied the code below for heston model in test-suite into a separate project and run it in debug, 

The initial heston parameters, which I think are initial guesses do not change after model calibation. ie when I check say kappa value via model->kappa(), its value is the same as before.  Am I missing something here.

Also the check for feller condition being satisfied ie 2kappa*theta > vol of vol * vol of vol, does it apply to the initial guess parameters?

Regards

Theo

void HestonModelTest::testDAXCalibration() {

    BOOST_TEST_MESSAGE(

             "Testing Heston model calibration using DAX volatility data...");

    SavedSettings backup;

    Date settlementDate(5, July, 2002);

    Settings::instance().evaluationDate() = settlementDate;

    CalibrationMarketData marketData = getDAXCalibrationMarketData();

    

    const Handle<YieldTermStructure> riskFreeTS = marketData.riskFreeTS;

    const Handle<YieldTermStructure> dividendTS = marketData.dividendYield;

    const Handle<Quote> s0 = marketData.s0;

    const std::vector<boost::shared_ptr<CalibrationHelper> > options

                                                    = marketData.options;

    const Real v0=0.1;

    const Real kappa=1.0;

    const Real theta=0.1;

    const Real sigma=0.5;

    const Real rho=-0.5;

    boost::shared_ptr<HestonProcess> process(new HestonProcess(

              riskFreeTS, dividendTS, s0, v0, kappa, theta, sigma, rho));

    boost::shared_ptr<HestonModel> model(new HestonModel(process));

    boost::shared_ptr<PricingEngine> engine(

                                         new AnalyticHestonEngine(model, 64));

    for (Size i = 0; i < options.size(); ++i)

        options[i]->setPricingEngine(engine);

    LevenbergMarquardt om(1e-8, 1e-8, 1e-8);

    model->calibrate(options, om, EndCriteria(400, 40, 1.0e-8, 1.0e-8, 1.0e-8));

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