Re: call-put parity in G2++

Posted by sarpkacar on
URL: http://quantlib.414.s1.nabble.com/call-put-parity-in-G2-tp6236p6238.html

The difference is  for 1M notional 

 

i) with the test parameters as in BermudanSwaption example 135€

 

ii) with real market data 1622€

 

I implemented another version of this formula, please see http://www.itwm.fraunhofer.de/fileadmin/ITWM-Media/Zentral/Pdf/Berichte_ITWM/2009/bericht_170.pdf. It preserves the put-call parity.   

 

I attached a condition under which the put-call parity for ATM swaptions stays valid.

 

 

On Mon, Sep 12, 2011 at 11:11 AM, Ferdinando Ametrano <[hidden email]> wrote:

On Thu, Sep 8, 2011 at 9:56 PM, SK A <[hidden email]> wrote:

> [...] test the call-put parity in G2++

> model. The test fails in the closed form implementation. I compared the code
> and the formula in Brigo and Mercurio, it seems to be ok. Does anyone have
> any idea what can be going wrong?

How large is the error?

Does the formula preserve put-call parity? i.e. is it an
implementation bug or a closed formula approximation error? In the
latter case we could jut implement the call using the put value and
the parity constaint

ciao -- Nando

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