Re: newbie question on using MC to value autocall with asian option feature

Posted by archlight on
URL: http://quantlib.414.s1.nabble.com/newbie-question-on-using-MC-to-value-autocall-with-asian-option-feature-tp6821p6824.html

Thanks a lot, Klaus. basically i use AmericanPathPricer as template to modify into autocallpathpricer. I changed only operater() part as below

-------------------------------------------------------------------------------------------------
  Real AutoCallPathPricer::operator()(const Path& path, Size t) const {
               
                Real sum = 0;

                for(int i=0; i<10;i++)
                        sum+=state(path, t-i);

        return payoff(sum/10);
    }
-------------------------------------------------------------------------------------------------

How do I assign this to particular engine. do I need to write a new engine to make path pricer assignment inside calculate() method. is there something like engine.setPathPricer() to decouple pricer design from engine design

archlight
Regards

Klaus Spanderen-2 wrote

Hi

IMHO I think you have to implement a new AsianAutoCallablePathPricer which is
derived from EarlyExercisePathPricer<Path>. The operator() of this pricer
should perform the averaging over the previous ten days and implement the
autocallable feature. The Bermudan feature, is it a issuer calll right or an
investor call right?

>From the model point of view pricing this sturtures is a challange. I've seen
people using hybrid stoch vol equity + Hull White interest rate processes to
price this products. Simple local vol + deterministic interest rates can lead
to "wrong" prices.

regards
 Klaus

On Tuesday 25 January 2011 04:21:21 archlight wrote:
> based on my study, I am thinking to extend Longstaff Schwartz MC to have
> pricer with asian option feature. meanwhile it can price Bermudan option.
>
> can someone enlighten me on this. I am total newbie in quantlib
>
> archlight
>
> archlight wrote:
> > Hi all,
> >
> >     I am newbie to quantlib. I am learning it by valuing some of product
> > valuing at our department. I have one equity index derivative with
> > Bermudan,
> > autocall and asianoption feature embedded. something like
> >
> >    three kock-out determination day
> >    K1, K2, K3
> >    at each knock-out date, payoff is if (average(previous ten days
> > underlying price)>index, Notional*func(Ki)) where i=1, 2, 3
> >
> >    I tried to pass Bermudan exercise to DiscreteAveragingAsianOption but
> > it
> > seems wrong type. I am using Longstaff Schwartz to achieve it. but i am
> > not
> > sure how to collect previous ten days result into payoff class.
> >
> >    what is your suggestion!
> >
> > archlight
> > Regards
> >
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