MakeMCEuropeanEngine<PseudoRandom>
Posted by
Frank Hövermann on
Nov 01, 2007; 10:12pm
URL: http://quantlib.414.s1.nabble.com/MakeMCEuropeanEngine-PseudoRandom-tp9899.html
Nachricht
Hi
there!
When I
change the value which is passed to .withTimeSteps starting from 1 to, say, 5 in
the case of non-flat vol term structure (but flat skew) which is
defined by 5 points on the time scale, the value 1 results in a plain
vanilla call option's value which corresponds to the start vol (all else
being equal). Increasing the number of time steps the option's value seems to
approach the value of the closed form solution where the speed of convergence
depends on the particular shape of the term structure in the neighborhood of
maturity.
I would
expect, especially in the case of one time step for this plain vanilla call, the
vol to be taken as the terminal vol not the initial one. Am I
wrong?
Regards
Frank
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