Re: termstructure daycounter and put/call parity

Posted by Roland Lichters on
URL: http://quantlib.414.s1.nabble.com/termstructure-daycounter-and-put-call-parity-tp4936p4937.html

Hi Nando,

I tried the prerelease tarball and yes, I can confirm that the bug is fixed.

Many thanks for your efforts!

Roland

Von: "Ferdinando Ametrano" Gesendet: 27.07.06 18:58:15 An: "Roland Lichters" CC: [hidden email], [hidden email] Betreff: Re: [Quantlib-users] termstructure daycounter and put/call parity Hi Roland   the bug it's been fixed on the CVS trunk. Please let me know if you still have problem   cia o -- Nando   On 7/18/06, Roland Lichters <[hidden email]> wrote: Hello all, the QuantLib test-suite (capfloor.cpp) checks that the put/call parity (capNPV - floorNPV = swapNPV) holds. It seems to me that this test is passed successfully only as long as one chooses  term structure daycount Actual360(), see function setup() in capfloor.cpp. After setting this to e.g. ActualActual(ActualActual::ISDA) and keeping anything else unchanged, the test suite fails with the following messages .. Running 236 test cases... capfloor.cpp(283): fatal error in "CapFloorTest::testParity": put/call parity violated:     leng th:      1 years     volatility:  1.000000 %     strike:      3.000000 %     cap v alue:   2.01507     floor value: 0     swap value:  1.94683 .. because the  cap price is overstated. I assume that the term structure daycounter should not have this effect on pricing results. Shouldn't it be arbitrary? Would you please have a quick look and correct me if I am wrong. I noticed this while building a small caplet volatility bootstrap tool that I'd like to contribute (eventually) if there is any interest.   Many thanks for your efforts, Roland

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