SciFinance: The Advantage for Derivatives Pricing Model Development
Robust pricing model calibration
SciComp customers benefit from two types of solutions for model calibration. SciCalibrator is a module of SciFinance that gives users the ability to develop their own calibration functions. Ready-n-Customizable Calibrators is a suite of robust, ready-to-use, standalone calibration functions.
SciCalibrator is a module of SciFinance that allows users to specify calibration problems at a high level and then generate the corresponding C-family source code for use with a given pricing model or as a standalone routine.
SciCalibrator includes an extensive library of very fast analytic and semi-analytic pricing functions for use in building calibrators, including parameterized local volatility, stochastic volatility (with and without jumps), and pure jump models; generic short rate and reduced form credit models with calibration to volatility term structure of cap/swaptions and CDS spreads or corporate bonds; and LIBOR Market Model calibration.
Many models accommodate time dependent parameters, either exactly through numerical methods or through fast approximate analytic functions. Available optimization techniques include Levenberg-Marquart and simulated annealing.
SciComp Consulting offers robust, ready-to-use, Ready-n-Customizable Calibrators that can be customized to meet a user's particular needs and requirements. Calibrators are available as Windows/Unix executables, Excel spreadsheets and add-ins, or with Java, .Net, COM, or Python wrappers.
- Futures Volatility Surface Calibrator utilizes the SciComp extended classical log-normal model to incorporate local volatility surfaces for each maturity.
- SLV Calibrator is based on the work of Ren, Madan and Qian [Risk, Sept 2007] and the Bloomberg paper "Stochastic Local Volatility" by Tataru & Fisher.
- Heston Stochastic Volatility Calibrator for Heston stochastic volatility models. Typically calibrates to O(100) options in a few seconds.
- Local Volatility Calibrator is applicable to any portfolio of European options written on a single asset. This includes equity and FX options and commodity options written on spot prices.
- 1- or 2-Factor Short Rate Calibrator for one- or two-factor additive Gaussian short rate models.
- ATM Gabillon and Schwartz97 Calibrators for a portfolio of at-the-money future contracts.
- CDS Calibrator extracts a piecewise constant hazard rate from standard credit default swap (CDS) market quotes.
- Large Pool Model Calibrator computes an implied correlation for the given expected loss specified by credit tranche spreads.
- Semi-Analytic Implied Base Correlation Calibrator includes credit index-based structures (e.g., DJ Itraxx, etc.)
- Custom Calibrators are available from SciComp Consulting for proprietary models, for standard models using non-vanilla contracts, or combinations of both.
Find out more about Ready-n-Customizable Calibrators.
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