Convertible Bond Pricer with AFV model

Daniel Duffy

C++ author, trainer
Ryan,
That's a nice challenging project :) Are you doing it by FDM?

A quick glance is that it is a system of PDEs with constraints, more or less?

Some approaches

1. Method of Line (MOL) with penalty/barrier using Boost C++ odeint.
Chapter 1. Boost.Numeric.Odeint - 1.67.0

(basically, you discretize in S only and let the solver do the t part, cool, yes?)

2. ADE method.
https://onlinelibrary.wiley.com/doi/epdf/10.1002/wilm.10366
https://onlinelibrary.wiley.com/doi/pdf/10.1002/9781118818572.app3
https://www.wilmott.com/wp-content/uploads/2016/07/160718_ade.pdf

Both 1 and 2 are easy to program.

3. Crank Nicolson etc. of course.
 
Last edited:

Daniel Duffy

C++ author, trainer
You're welcome. One of my MSc students has done a HW2 Bermudan callable bond project using ADE (I did the MOL part) and will probably do a convertible bond in ADE soon.
It would be good to keep in touch.
 
Last edited:
Top