Hi
I've noticed a similar behaviour when using the Heston pricing engine with a
Gauss-Laguerre integration of order > 200. I guess switching towards
Gauss-Lobatto will help if you really need more accuracy than a Gauss-Hermite
integration of order 40 provides.
cheers
Klaus
On Tuesday 23 September 2008 10:58:55 Yomi wrote:
> Hi,
>
> I have added a model that requires FFT for price vanillas.
> The integral needs for be computed from -inf to inf, so the choice of
> GaussHermiteIntegration.
> I have seen that increasing the integration order leads to very high
> weights which give totaly wrong numbers.
> I have found that the optimal number should be around 40. If we go to 64 or
> 128, the results are negative due to the heavy weights.
> Does it make sense to you? Is there something I am missing?
>
> Cheers
--
Klaus Spanderen
Ludwig Erhard Str. 12
48734 Reken (Germany)
EMail: klaus@NOSPAMspanderen.de (remove NOSPAM from the address)
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