Heston analytic engine possible problem?

Posted by YiannisP on Jan 19, 2017; 9:44pm
URL: http://quantlib.414.s1.nabble.com/Heston-analytic-engine-possible-problem-tp17977.html

Hi guys,

I briefly used the Heston analytic engine and something doesn't seem quite right.
One can look at the unit test "testAlanLewisReferencePrices" where the reference prices are matched to very high accuracy (1.e-12 or lower), with either laguerre or gaussLobatto integration. If we only change one parameter there (sigma, from 1 to 0.1), everything breaks down. Laguerre will give 16.83 where guassLobatto gives 15.84 (ATM call). Lobatto seems the one which is more wrong, but Laguerre is not too accurate either. By the way, reducing c_inf from the currently chosen value, brings Lobatto very close to Laguerre.

Any insights into this? Am I doing something wrong? Is there something that needs to be fine-tuned?

Best

Yiannis