A high-performance calibration module for local and stochastic volatility models.
The evidences of non-normal distributed log-returns and the presence of stochastic volatility leads researchers to propose more and more sophisticated models. For option pricing in a given stochastic diffusion model, practitioners have to deduce the unknown model parameters from call's prices provided by the market. They need flexibility, accuracy, speed.
An extensive list of models
FinCal Component lets you choose yourself the most suitable diffusion model from an extensive list of popular ones:
- Levy processes
- Normal Inverse Gaussian (NIG), Variance Gamma (VG), Carr Geman Madan & Yor (CGMY)
- Stochastic volatility
- Heston (HEST) and its extension with jumps (HEST-J)
- Correlated Ornstein-Uhlenberg (COU) and its extension with jumps (COU-J)
- Time-changed Levy processes
- Cox-Ingersoll-Ross stochastic clock (NIG-CIR, VG-CIR, CGMY-CIR)
- Gamma-OU stochastic clock (NIG-GOU, VG-GOU, CGMY-GOU)
- Local volatility surface approach via spline representation
Know the precision of your calibration
Model calibration involves the computation of option prices that need to best fit to your market data. For all the models above, no closed form formula of option prices exists that can be computed without discrete approximation. Depending on the model you have selected, either an adaptive grid Partial Differential Equation approach or a Discrete Fourier Transform technique is used that provides a posteriori error estimates on the computed option prices.
When speed becomes a challenge
When working on an exotics book based on hundreds of underlying assets, the time spent for the calibration of all assets prior to running any simulation becomes a real issue. FinCal Component calibrates the Heston model on a implied volatility surface with 150 data of the Eurostoxx 50 index (October 7th 2003) within 19 seconds on a 2 GHz Pentium.
Easy integration
- Available for Windows 95/98/NT/2000/XP and Unix/Linux platforms
- Microsoft Excel plug-in
- API interfaces in ANSI C, C++, Visual C++, Visual Basic, Microsoft.NET and Java.