Reply To: Formula Volatility Surface with no Gridpoint Rows

Tom Graham

Yes, so a composite curve has no gridpoints (unless it does), so in terms of gridpoint delta, you just have the gridpoints of the parent standard indices – with inherited delta.
But the composite curve can still have daily granularity – that is one unique “effective output” value per day – even if the parents are monthly – but only if you set the Date sequence of the composite index to 1cd, and you specifically do not use “replace_curve_dseq(1)” – which would replace the daily effective calculation points with the monthly points from the parent.
I.e. on a composite index, the date sequence defines the set of points for which the index outputs a unique effective value: these effective dates are gridpoint dates in terms of calculating the index output, but they are not gridpoints in terms of calculating Tran Gpt Delta.

So: You can have a parent standard index with monthly gridpoints which outputs one effective gridpoint value per month.
You can the have a child composite index which calculates and outputs one unique effective value per day – something like the parent monthly price plus a daily spread – where the spread is calculated in the composite index formula.
Tran Gpt Delta will only be calculated for the parent monthly gridpoints.

I think you can do the same thing with composite vols – that is have some composite volatility formula which generates a unique value per day (whatever lookup key “day” refers to), while the Tran Gpt Vega result still only sees the gridpoints of the parent standard vols.
Unfortunately I have no experience in setting up such complex composite vol formulae, and I don’t have a good understanding of all the variables and functions available for these.

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