volatility pricing models to market data
Austin, TX--June 12, 2003--SciComp Inc. today announced the release of SciCal, software for calibrating derivatives pricing models to market data. SciCal specifically calibrates models that use stochastic volatility (SV) and stochastic volatility + jumps (SVJ). SciCal was developed in response to the growing use of SV and SVJ models to price structures that are sensitive to forward volatility skew.
SciCal provides a fast and stable calibration while avoiding the instability problems of other calibration methods. The modern search variant used in SciCal is very fast and has been highly tuned to the SV/SVJ calibration problem. SciCal can calibrate from a handful to hundreds of options to market data in under a minute.
"Like other calibrators, SciCal searches for parameters that minimize the
model-to-market mismatch. What makes SciCal different is the way it searches and how fast it is accomplished," said Curt Randall, Executive Vice President of SciComp. Standard calibration algorithms start from an initial 'best' guess for model parameters and run until reaching a minimum. Unfortunately, there are typically many local minima, and the initial guess may not lead to the global minimum. Small moves in the market may cause a jump from one minimum to another, leading to instability. SciCal performs a stochastic search of the entire parameter space, climbing out of local minima to find the global minimum.
"Finding the true global minima is the whole point of calibration. If your
calibration has unstable parameters, model risk can increase as the market moves," added Randall.
Quantitative analysts, traders and risk managers can benefit from SciCal,
which runs in Excel or as a standalone executable for Windows or Unix.
SciCal allows expert users to adjust important search parameters for complete control over the calibration process, or SciCal can make optimal choices for the user.
"SciCal is a natural addition to the SciFinance(r) suite of products," said
Elaine Kant, President of SciComp. "Since it was developed with practioner
input, we are confident that it will satisfy our customers' needs to calibrate their derivatives pricing models. Customers have found that SciCal is a fast, efficient and reliable method for calibration and is a quicker and less expensive solution than in-house development." Kant added.
SciCal is the latest addition to SciComp's SciFinance software suite, which
enables users to automatically generate source code without programming for
derivatives pricing models. SciFinance is used by investment banks worldwide to accurately price the full gamut of derivative instruments, including credit, convertible bonds, equities, foreign exchange and fixed income. Unlike other solutions, SciFinance-generated codes are not black-box executables-users own them and there are no run-time licenses.