Posted by
Peter Caspers-4 on
URL: http://quantlib.414.s1.nabble.com/Gaussian-1D-Models-tp15307p15308.html
Hi Cheng,
there is a one factor Hull White and a one factor Markov functional
model in experimental / models, both derived from a common base class
Gaussian1dModel (which essentially requires the implementation of a
numeraire and a zerobond method). Regarding the Markov model there are
references given in the source code. The Hull White model is an
implementation of Piterbarg, formula (10.14), with piecewise reversion
\kappa and volatility \sigma, so you could start reading around this
place in the second volume. The pricing engines in the same folder are
accepting both models (actually any Gaussian1dModel instance).
There is no particular reason for the redundancy with the classes in
the models folder. First there was the Markov model, based on
CalibratedModel. I copied the code and amended it to get a Hull White
model and eventually extracted the common things. Maybe it would have
been wiser to generalize the existing Hull White implementation. Well.
I guess the Gsr class is a bit more flexible compared to HullWhite in
that both reversion and sigma can be made time dependent (although I
think I saw some developments in that direction in some experimental
sister folder, too (?)). Also multiple curve setups are supported (no
stochastic basis though) and you can include a credit spread to price
optional parts of exotic bonds. The pricing engines are all using
numerical integration against the state variable density. I really
want to add FD engines very soon (or you could try maybe ? :-) ). I
have some confidence in the results produced from both models since we
used them to validate corresponding models in a commercial trading
system across a range of products.
Hope that helps.
Thank you
Peter
On 23 May 2014 04:48, cheng.li <
[hidden email]> wrote:
> Hi Pcaspers and teams,
>
>
>
> Recently you add a new example called Gaussian1dModels in quantlib/examples.
> Really appreciate your kind effort to share your expertise on this topic.
> Currently I am learning from your example and try to understand more…
>
>
>
> Some questions that I need your help…
>
>
>
> 1. Would you like to share with me the reference literature about
> Gaussian 1D models? I have the 3 volume books written by Anderson and
> Piterbarg. There are topics on Short rate models and quasi-Gaussan models in
> volume 2. Which is the most relevant to your codes?
>
>
>
> 2. As I saw you wirte one line in your example: “The model is a one
> factor Hull White model with piecewise volatility”. So can I know what is
> the essential difference between Gaussian 1D models and existing short rate
> models which are located under folder models/shortrates? Is this a new
> numerical scheme?
>
>
>
> Really expecting to hear from you.
>
>
>
> Regards,
>
> Cheng
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