xavier g ueit, romain r ousseau 3 rd year student project @ ensae 2011/2012
TRANSCRIPT
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
C++ HULL – WHITE PRICER3rd year student project @ ENSAE 2011/2012
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Model
EDS :
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Background
Banks need : Parcimony3-params is already a lot to interpret
Flexibilitymodel should be able to produce the ≠ historical curve
shapes(+ volatility humps, Bermuda squeeze, … )
Tractabilityformulas for bonds & swaps options
Speedcalibration, pricing & risks (semi-) explicit methods
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Class Hierarchy Outline
Xavie
r G
UEIT
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Rom
ain
RO
USSEA
U
Implementation details
Everything is computed on the same tree
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
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Nifty Tricks
Root Finder Algorithm will accept :
a Functor a λ-Function a Member Function Pointer
is also templatized on the <x,y> pair type
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Code Engineering
SVN Versionning Main Repository : Google Code project Externals for Boost & GTest libraries
Unit Tests Requires a library (static or dynamic) Less helpful for mathematical features TDD very hard in practice
Trade-Of induced by file splitting + : less versioning conflicts + : more efficient build - : increased cost of trial & errors
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Failures
The address of an element in a STL Vector is not constant
Time indexes can be tricky ( & an error can have a huge impact if the grid is irregular)
= vs. == was the cause of 3 major bugs !
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Possible Extensions
Hull – White parameters : Calibration on a Swaptions market-data Effect on Black implied surfaces ?
Risk computations : Greeks (Δ by buckets, sensitivity to σ
and a) VaR (curve stress-test scenarios
importation) Performance :
Trace expensive calls Cache them ?
Xavie
r G
UEIT
,
Rom
ain
RO
USSEA
U
Bibliography
Interest Rates Theory Brigo, Mercurio (book) Hull, White (1994, 1996a, 1996b articles)
Numerical Implementation Both
http://ramneekhanda.wordpress.com/2011/09/27/hull-white-model-for-interest-rate-derivatives/