Posted by
Luigi Ballabio on
URL: http://quantlib.414.s1.nabble.com/Specifics-of-Himalayan-Option-tp5293p5299.html
On Fri, 2009-12-18 at 18:37 +0100, Marcin Pawlik wrote:
> 2009/12/18 Luigi Ballabio <
[hidden email]>:
> > 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.)
>
> Yes. I was mistaken. I misread lines 48-50 in the mchimalayaengine.cpp.
>
> I think that in the solution you propose one has to normalize not only
> the starting value but the strikes in the volatility surface as well.
Ouch--you're right.
> Otherwise one can get rid of lines 40 and 49 and replace "bestPrice"
> in line 55 with "bestYield".
Yes, at this time that's what I'd suggest Andreas to do.
> I'm not sure if I'm a proper person to suggest it but maybe we (me?
> someone else?) could adjust the himalaya engine and the himalaya
> option so that both types of payout determination (relative and
> absolute strike) are covered? What do you think?
I think we should. In the meantime, I guess I better put Himalaya
options in the experimental tree before release 1.0.
Are you willing to have a go at the implementation?
Later,
Luigi
--
Call on God, but row away from the rocks.
-- Indian proverb
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