http://quantlib.414.s1.nabble.com/RE-Quantlib-dev-RE-R-Credit-default-pricing-G2-model-tp4114p4115.html
swap) via Hullwhite, BK, HL G2++ etc... and then apply the LSMC logic to
requires 3 underlying models, at least, in order to price this deal. One
each for the legs and one for the FX component. Forget using a Tree.
>From: "marco\.tarenghi\@libero\.it" <
[hidden email]>
>To: "toyin_akin" <
[hidden email]>
>CC: "quantlib-users" <
[hidden email]>,"quantlib-dev"
><
[hidden email]>
>Subject: RE: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing
>/ G2++ model
>Date: Mon, 10 Oct 2005 10:49:51 +0200
>
>Hi Toyin,
>as you said, the procedure is the one described in Chapter 11 of the
>Brigo-Mercurio book: I think you should model the two curves using 2
>different G2 models.
>The problem is that when pricing options with bermudan features you need
>trees: every G2 model implies a tridimensional tree but I think that you
>cannot let the two processes evolve on the same tree since each tree (and
>in particular the number of nodes at each time step) depends on the model
>parameters.
>I don't know which is the best way to proceed, but I'll think a little bit
>about that.
>Let me know if you find some hint.
>
>Marco
>---------- Initial Header -----------
>
>From :
[hidden email]
>To :
>
[hidden email],
[hidden email]
>Cc :
>Date : Fri, 07 Oct 2005 18:52:24 +0100
>Subject : RE: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing
>/ G2++ model
>
>
>
>
>
>
>
> >
> > Hi,
> >
> > Concerning the Bermudan FLT/FLT swap (or bermudan basis swaption)
>assuming
> > one leg is based on a LIBOR curve and the other on a BASIS curve, how
>does
> > one refer to each individual curve within a DiscretizedAsset class
>(assuming
> > that one wants to model the code similar to that of the DiscretizedSwap
> > class). Or is the infrastructure only suitable for only refering to a
>single
> > curve.
> >
> > It looks like you need to model two G2++ objects and their joint
>dynamics.
> >
> > Probably the logic presented within the beginning of Chapter 11 of
> > Brigo-Mercurio.
> >
> > Best Regards,
> > Toyin Akin.
> >
> >
> > >From: "Toyin Akin" <
[hidden email]>
> > >To:
>
[hidden email],
[hidden email]
> > >Subject: RE: [Quantlib-dev] RE: R: [Quantlib-users] Credit default
>pricing
> > >/ G2++ model
> > >Date: Fri, 07 Oct 2005 17:21:56 +0100
> > >
> > >
> > >Hi Marco,
> > >
> > >Ignore my comments on bermudan swaptions on FLT/FLT swaps where both
>legs
> > >are of the same currency. This can be defined, as you said, within a
>new
> > >class inherited from the DiscretizedOption class if pricing via the
>Tree.
> > >
> > >However can the same be said with FLT/FLT swaps with different
>currencies
> > >on each leg (including exchange of notionals)?
> > >
> > >Best Regards,
> > >Toyin akin.
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >>From: "Toyin Akin" <
[hidden email]>
> > >>To:
> >
> >>
[hidden email],
[hidden email]
> > >>Subject: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing
>/
> > >>G2++ model
> > >>Date: Fri, 07 Oct 2005 08:54:53 +0100
> > >>
> > >>
> > >>Hi Marco,
> > >>
> > >>I too deduced that the main implementation was on page 149, but the
> > >>formula for M(0,T) is on pg 144. Thus I was refering just to this
>piece of
> > >>code.
> > >>
> > >>Thankyou for the explanation. I just wanted to know where the
> > >>simplification came from and now I know.
> > >>
> > >>As for the pricing of Bermudan swaptions on FLT/FLT swaps, surely some
> > >>modifications will need to be done within the G2++ class?
> > >>
> > >>In fact you would have 2 sets of logic, one for FLT/FLT (same
>currencies)
> > >>and one for FLT/FLT (different currencies). Or am I missing
>something...?
> > >>
> > >>A G2++ model is perfect for pricing bermudan options on swaps, where
>the
> > >>swaps have differing currency legs.
> > >>
> > >>Thankyou again,
> > >>Best Regards,
> > >>Toyin Akin.
> > >>
> > >>>From: "Tarenghi Marco" <
[hidden email]>
> > >>>To: "Toyin Akin" <
[hidden email]>
> > >>>Subject: R: [Quantlib-users] Credit default pricing / G2++ model
> > >>>Date: Fri, 7 Oct 2005 09:01:17 +0200
> > >>>
> > >>>
> > >>>Hi Toyin,
> > >>>for what concerning the implementation of the G2++ model, I have
>tested
> > >>>the QuantLib functions and I think they work quite well. The formulas
>in
> > >>>G2::SwaptionPricingFunction class you are referring to are those on
>page
> > >>>149 of the Brigo-Mercurio book and not those on page 144.
> > >>>Anyway they use the formulas on page 144, since mux_ = -M(0,T): the
>fact
> > >>>is that the expression of mux_ is obtained using the formulas on page
>144
> > >>>but simply setting s=0 and t=T, so that the expression simplifies a
>lot.
> > >>>
> > >>>I hope I have been clear enough.
> > >>>
> > >>>Also, you are right: this class can price only vanilla options.
> > >>>Bermudan and/or amortizing swaptions can be priced using trees, and
>these
> > >>>are available in the G2 class: what you have to do is to implement a
>new
> > >>>Swaption class which has to derive from the DiscretizedOption class.
> > >>>
> > >>>Sorry for answering directly to you and not to the mailing list but I
> > >>>cannot do it with my office pc...
> > >>>I should do it from home
> > >>>
> > >>>Best regards,
> > >>>Marco
> > >>>
> > >>>-----Messaggio originale-----
> > >>>Da:
[hidden email]
> > >>>[mailto:
[hidden email]]Per conto di Toyin
> > >>>Akin
> > >>>Inviato: giovedì 6 ottobre 2005 17:26
> > >>>A:
[hidden email];
[hidden email]
> > >>>Oggetto: [Quantlib-users] Credit default pricing / G2++ model
> > >>>
> > >>>
> > >>>
> > >>>Hi folks,
> > >>>
> > >>>Are there any plans to implement credit default swaps/options within
> > >>>QuantLib?
> > >>>
> > >>>I read somewhere, within one of the wilmott forums, that someone did
> > >>>actually have some working code. However I'm not too sure whether
>they
> > >>>are
> > >>>going to dedicate this code to the QuantLib project.
> > >>>
> > >>>I certainly would like to get a good handle on a C++ implementation
>of
> > >>>Credit derivatives as I'm pretty new to it, however I don't want to
>start
> > >>>a
> > >>>new credit project which could take months if someone else already
>has
> > >>>some
> > >>>working code.
> > >>>
> > >>>Also, I am stepping through the code of the G2++ model, comparing the
> > >>>math
> > >>>there to that of the Brigo-Mercurio book and all seems well apart
>from
> > >>>one
> > >>>expression that I can't get my head around.
> > >>>
> > >>>This concerns the code within the constructor of the
> > >>>G2::SwaptionPricingFunction class.
> > >>>
> > >>>There are expressions for mux_ and muy_ which I believe corresponds
>to
> > >>>the
> > >>>same expressions at the bottom of page 144.
> > >>>
> > >>>Taking just the mux_ expression, for example, I cannot match up the
> > >>>expressions within the book to that of the code. It's the 2nd and 3rd
> > >>>expressions of the formula (according to the book) that I am having
>some
> > >>>trouble matching up.
> > >>>
> > >>>Can someone confirm that the code here is correct and it's just a
>case of
> > >>>some smart mathematical manipulation (My brain has already died
>after
> > >>>validating all the other parts of the G2 model!!).
> > >>>
> > >>>Also from my analysis, it looks like we can only price options on
>vanilla
> > >>>swaptions under this G2++ implementation, no variation of notionals
> > >>>(amortisation), coupons, or margins (spreads). This should be
>possible
> > >>>but I
> > >>>believe that the limiting factor is because it is based on a
>SimpleSwap
> > >>>object which does not allow for such rich definitions of a swap.
> > >>>
> > >>>Also, does anyone know what code changes would be needed to implement
>a
> > >>>bermudan swaption on a FLT/FLT swap? I don't think that the
> > >>>SwaptionPricingFunction class is valid for this type of structure.
> > >>>
> > >>>Very good clean code by the way...
> > >>>
> > >>>Best Regards,
> > >>>Toyin Akin.
> > >>>
> > >>>
> > >>>
> > >>>
> > >>>
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