Re: Re: FdDividendAmericanOption

Posted by Luigi Ballabio on
URL: http://quantlib.414.s1.nabble.com/FdDividendAmericanOption-tp3453p3460.html

On 12/30/04 09:06:01, Joseph Wang wrote:
>
> The one thing that seems to pop out is the BSM operator which takes as
> input the log of the gridSpacing_.  Knowing nothing about the code, it  
> would seem to me that the BSMOperator is expecting a linear grid, and  
> putting in a logarithmic grid would appear to do bad things.

Joseph,
        the BSM operator discretizes the equation for x = log(S), therefore  
a logarithmic grid in S is used which corresponds to a linear grid in x.

Also, I very much appreciate that you dived in to get data, as  
unfortunately I don't have the time to dive in myself now---thanks a lot.

If I can suggest a line of investigation, I find interesting that, as you  
said,

> If I run the code with zero dividend, I still get odd values.  I don't  
> get any odd values if I just run FdAmericanOption.

You might get some insight by comparing the two calculations. Are the two  
grids the same when the two classes are passed the same arguments? Are the  
calculated values the same until the first dividend payment is reached?  
What happens to the asset values when the code for applying dividends is  
triggered, even with zero dividends?

Later,
        Luigi