Re: BS Path Generation using exact formulea instead of Discritization schemes

Posted by Luigi Ballabio on Feb 02, 2009; 4:34pm
URL: http://quantlib.414.s1.nabble.com/BS-Path-Generation-using-exact-formulea-instead-of-Discritization-schemes-tp6953p6954.html

On Thu, 2009-01-29 at 12:40 -0800, thusi wrote:

> Hi All,
>
> What is the best way to get BS process to generate paths using the exact
> formulea instead of the Euler schemes. i.e.
>
> Currently BS process uses
>   Sn+1 - Sn = (mu - 0.5*sigma^2)* (Sn)deltat + sigma *Sn*sqrt(deltat)*N(0,1)
>
> What I would like to use is the exact equation to generate the same paths
> i.e
>   Sn+1 = Sn*exp[(mu - 0.5*sigma^2) + sigma*sqrt(dt)*N(0,1)]

Thusitha,
        the existing BS process evolves log(S), so it might already do what you
need in this case.  Is that so?

Luigi



--

Westheimer's Discovery:
A couple of months in the laboratory can frequently save a
couple of hours in the library.



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