Re: isTimeDependent ???

Posted by Luigi Ballabio on Oct 03, 2005; 3:30am
URL: http://quantlib.414.s1.nabble.com/isTimeDependent-tp4060p4063.html

On 10/01/2005 05:23:13 PM, Joseph Wang wrote:
> I think this depends on user requirements.  There is a trade-off  
> between keeping track of these things so that the library figures out  
> these things and letting the user use the library in ways that aren't  
> mathematically correct but gets you a quick and dirty answer.
>
> Where this bothered me was if you use the analytic pricing engines  
> against instruments with changing interest rates, you will get the  
> wrong answer.

Not necessarily---for an European option, simply using the zero-yield  
to maturity gives you the right price, not an approximation (the actual  
shape of the yield term structure doesn't matter, only its integral.)

The principle I would stick to is that users know better. I'm afraid  
that trying to have the library do what it thinks the Right Thing might  
prevent users to do what they know to be the right thing.

Later,
        Luigi


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