Posted by
Luigi Ballabio on
URL: http://quantlib.414.s1.nabble.com/Specifics-of-Himalayan-Option-tp5293p5297.html
On Thu, 2009-12-17 at 22:07 +0100, Marcin Pawlik wrote:
> 2009/12/17 Andreas Spengler <
[hidden email]>:
> > Hi Marcin,
> >
> > thanks for your quick response; would the below also hold for the
> > QuantLib implementation?
>
> Yes. QuantLib defines Himalaya Option as having relative strike and
> averaging performances relative to the starting time.
> Look at: ql/pricingengines/basket/mchimalayaengine.cpp.
Looking at the code, the engine is using performances (relative to the
starting value) to choose the best assets, but then it adds the absolute
price to the running average, so you'd need an absolute strike. If I'm
not mistaken, though, you can use a relative strike if you setup the
underlying processes so that the starting value is 1.0 for each of them
(since in that case, the price equals the performance.)
Luigi
--
I have yet to see any problem, however complicated, which, when you
looked at it in the right way, did not become still more complicated.
-- Poul Anderson
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