RE: Double Barrier Options

Posted by Ferdinando Ametrano-3 on
URL: http://quantlib.414.s1.nabble.com/SVD-routine-error-tp2794p2803.html

Hi Daniel

>I have prototyped some methods for Double Barriers in VBA and now
>looking at doing a QuantLib integration.
>
>I propose a design similar to the Current Single Barriers:
>[...]
ok

>Implementations are from Haug as a series of Single Barriers so can
>reuse some of the single barrier stuff here.
please include as many numerical examples from Haug's book and
VBA/spreadsheet as possible in the test suite, plus logical checks as
knock-in+knock-out=knock-less, etc.

>For the Tian's trinomial method, I see there is a trinomialtree class,
>and not quite sure how to integrate with it.
the only trinomial tree available in QuantLib it's the one used for
single-factor interest rate model. If I'm not wrong it's the Hull-White
trinomial tree.
The Tian tree already available in QuantLib is the binomial one (third
moment matching)

>  The tree for double
>barriers has different probabibilities for top half , middle and bottom.
>So can I implement it straight in the pricing engine or is it necessary
>to extend the trinomialtree class?
I'm not familiar with the problem, but I guess the tree could be reused in
other pricing engines or replaced by different trees in the double barrier
engine. If this is the case it would be better not to have its
implementation in the pricing engine: see how binomial trees are used in
the binomial pricing engine

>I don't see an implementation of Tian's trinomial for Single Barriers,
>so maybe I can also add:
>         trinomialbarrierengine
sure!

>Plus some optimisations using Richardson extrapolation.
I look forward to your proposed design as I'm interested to enable
Richardson extrapolation in the (future) Finite Difference engines.


>  Also on the analytic side will implement the BGK barrier adjustments.
you're welcome.

Please pay special attention to the test-suite: I am really worried about
contributions without an appropriate test-suite. Please try to reference
the relevant papers/books and to reproduced all numerical examples provided
in your sources

>I saw some nice uml on the website, what is being used to model this?
I'm sure Luigi will step in (at least) here...

ciao -- Nando