net.finmath.fouriermethod.calibration.models

Class CalibratableHestonModel

java.lang.Object

net.finmath.fouriermethod.calibration.models.CalibratableHestonModel

All Implemented Interfaces:

CalibratableProcess

public class CalibratableHestonModel
extends Object
implements CalibratableProcess

This class is creates new instances of HestonModel and communicates with the optimization algorithm. This class provides clones of herself: in such a way the information concerning constraints is not lost. The method getCharacteristicFunction is then passed to the FFT pricing routine.

Author:

Alessandro Gnoatto

Constructor Summary

Constructors

Constructor and Description
CalibratableHestonModel(HestonModelDescriptor descriptor) Basic constructor where all parameters are to be calibrated.
CalibratableHestonModel(HestonModelDescriptor descriptor, ScalarParameterInformation volatilityConstraint, ScalarParameterInformation thetaConstraint, ScalarParameterInformation kappaConstraint, ScalarParameterInformation xiConstraint, ScalarParameterInformation rhoConstraint, boolean applyFellerConstraint) This constructor allows for the specification of constraints.

Method Summary

Modifier and Type	Method and Description
HestonModel	getCharacteristicFunctionModel() Directly returns the characteristic function.
CalibratableHestonModel	getCloneForModifiedParameters(double[] parameters) Calibration substitutes in the model the parameters of the process with calibrated ones.
ModelDescriptor	getModelDescriptor() Every class implementing this interface must contain a ModelDescriptor from which we can create some concrete model.
double[]	getParameterLowerBounds() Extracts parameter lower bounds for the optimizer factory.
double[]	getParameterUpperBounds() Extracts parameter upper bounds for the optimizer factory.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

CalibratableHestonModel

public CalibratableHestonModel(HestonModelDescriptor descriptor)

Basic constructor where all parameters are to be calibrated. All parameters are unconstrained.

Parameters:

descriptor - The model descriptor for the Heston model.

CalibratableHestonModel

public CalibratableHestonModel(HestonModelDescriptor descriptor,
                               ScalarParameterInformation volatilityConstraint,
                               ScalarParameterInformation thetaConstraint,
                               ScalarParameterInformation kappaConstraint,
                               ScalarParameterInformation xiConstraint,
                               ScalarParameterInformation rhoConstraint,
                               boolean applyFellerConstraint)

This constructor allows for the specification of constraints. This is very liberal since we can impose different types of constraints. The choice on the parameters to be applied is left to the user. This implies that he user could create Heston models which are not admissible in the sense of Duffie Filipovic and Schachermayer (2003). For example, it is up to the user to impose constraints such that the product of kappa and theta is positive.

Parameters:

descriptor - The model descriptor for the Heston model.

volatilityConstraint - The volatility constraint.

thetaConstraint - The constraint for the theta parameter.

kappaConstraint - The constraint for the kappa parameter.

xiConstraint - The constraint for the xi parameter.

rhoConstraint - The constraint for the rho parameter.

applyFellerConstraint - If true, the Feller constraint is applied.

Method Detail

getCloneForModifiedParameters

public CalibratableHestonModel getCloneForModifiedParameters(double[] parameters)

Description copied from interface: CalibratableProcess

Calibration substitutes in the model the parameters of the process with calibrated ones. Market observables such as the initial stock value should not be changed.

Specified by:

getCloneForModifiedParameters in interface CalibratableProcess

Parameters:

parameters - The new parameters.

Returns:

a clone of the original model with modified parameters.

getModelDescriptor

public ModelDescriptor getModelDescriptor()

Description copied from interface: CalibratableProcess

Every class implementing this interface must contain a ModelDescriptor from which we can create some concrete model.

Specified by:

getModelDescriptor in interface CalibratableProcess

Returns:

The descriptor for this model.

getCharacteristicFunctionModel

public HestonModel getCharacteristicFunctionModel()

Description copied from interface: CalibratableProcess

Directly returns the characteristic function.

Specified by:

getCharacteristicFunctionModel in interface CalibratableProcess

Returns:

the characteristic function

getParameterUpperBounds

public double[] getParameterUpperBounds()

Description copied from interface: CalibratableProcess

Extracts parameter upper bounds for the optimizer factory.

Specified by:

getParameterUpperBounds in interface CalibratableProcess

Returns:

parameter upper bounds for the optimizer factory.

getParameterLowerBounds

public double[] getParameterLowerBounds()

Description copied from interface: CalibratableProcess

Extracts parameter lower bounds for the optimizer factory.

Specified by:

getParameterLowerBounds in interface CalibratableProcess

Returns:

parameter lower bounds for the optimizer factory.