Re: [R] optim function multi variables -newbie
michalseneca gmail.com> writes:
> I tried to modify the code,thanks for noticing...
> now i get that the function cannot be evaluated at initial parameters.
> However I do not know what does that mean..
> Should I try to modify parameters. I am still not sure of syntax of
> function. I cannot get that optimize work correctly.
> I am trying to test that..however I cannot get to a result..
> In matlab however that works correctly...
> Did anybody of you tried to succesfully run it ?
>
> Michal
I went through your functions and the Matlab code, below I will append my
versions. Matlab and R now return the same values, at least for a few test
cases. One obstacle, for instance, was that solve.polynom() expects the
coefficients in reverse order.
Here is an example of how to apply optim(). Whether the result is
resonable you'll have to find out for yourself:
MktVol <- c(20.8, 19.8, 18.1, 16.1, 15.1, 14.5, 14.0, 14.3, 15.0,
15.9, 16.2, 16.4, 16.6, 17.3, 19.1) / 100;
MktStrike <- c(4.3, 4.8, 5.3, 5.8, 6.3, 6.8, 7.3, 7.8, 8.3, 8.8,
9.3, 9.8, 10.3, 10.8, 11.3) / 100;
F <- 0.073
ATMVol <- 0.14
T <- 1
b<-1
parsbox<-c(0.7,0.5)
f <- function(x) EstimateRhoAndVol(x, MktStrike, MktVol, ATMVol, F, T, b)
optim(parsbox, f)
# $par
# [1] -0.06374008 0.60383201
Of course, there are some more open points, for instance will 'findAlpha'
always find a real, positive cubic root? etc.
--Hans Werner
### --- snip ---
library(polynom)
EstimateRhoAndVol <- function(params, MktStrike, MktVol, ATMVol, F, T, b)
{
# -
# Returns the following SABR parameters:
# r = rho
# v = vol-of-vol
# Uses ATM volatility to estimate alpha
# Required inputs:
# MktStrike = Vector of Strikes
# MktVol= Vector of corresponding volatilities
# ATMVol = ATM volatility
# F = spot price
# T = maturity
# b = beta parameter
# -
r <- params[1]
v <- params[2]
a <- findAlpha(F, F, T, ATMVol, b, r, v)
N <- length(MktVol)
ModelVol <- numeric(N)
error <- numeric(N)
# Define the model volatility and the squared error terms
for (i in 1:N) {
ModelVol[i] = SABRvol(a, b, r, v, F, MktStrike[i], T)
error[i] = (ModelVol[i] - MktVol[i])^2
}
# Return the SSE
y <- sum(error, na.rm=TRUE)
# Impose the constraint that -1 <= rho <= +1
# via a penalty on the objective function
if (abs(r) > 1)
y <- Inf
return(y)
}
SABRvol <- function(a, b, r, v, F, K, T)
{
# -
# Returns the SABR volatility.
# Required inputs:
# a = alpha parameter
# b = beta parameter
# r = rho parameter
# v = vol of vol parameter
# F = spot price
# K = strike price
# T = maturity
# -
# Separate into ATM case (simplest case) and
# Non-ATM case (most general case)
if (abs(F-K) <= 0.001) { # ATM vol
Term1 <- a/F^(1-b)
Term2 <- ((1-b)^2/24*a^2/F^(2-2*b) + r*b*a*v/4/F^(1-b) +
(2-3*r^2)*v^2/24)
y <- Term1 * (1 + Term2*T)
} else { # Non-ATM vol
FK <- F*K
z <- v/a*(FK)^((1-b)/2)*log(F/K)
x <- log((sqrt(1 - 2*r*z + z^2) + z - r)/(1-r))
Term1 <- a / FK^((1-b)/2) / (1 + (1-b)^2/24*log(F/K)^2 +
(1-b)^4/1920*log(F/K)^4)
if (abs(x-z) < 1e-10) Term2 <- 1
else Term2 <- z / x
Term3 <- 1 + ((1-b)^2/24*a^2/FK^(1-b) +
r*b*v*a/4/FK^((1-b)/2) + (2-3*r^2)/24*v^2)*T
y <- Term1 * Term2 * Term3
}
return(y)
}
findAlpha <- function(F, K, T, ATMvol, b, r, v)
{
# -
# Finds the SABR "alpha" parameter by solving the cubic equation described
# in West (2005) "Calibration of the SABR Model in Illiquid Markets"
# The function can return multiple roots. In that case, the program
# eliminates negative roots, and select the smallest root among the
# positive roots that remain.
# Required inputs:
# F = spot price
# K = strike price
# T = maturity
# ATMvol = ATM market volatility
# b = beta parameter
# r = rho parameter
# v = vol of vol parameter
# -
# Find the coefficients of the cubic equation for alpha
C0 <- -ATMvol * F^(1-b)
C1 <- (1 + (2-3*r^2) * v^2 * T / 24)
C2 <- r * b * v * T / 4 / F^(1-b)
C3 <- (1-b)^2 * T / 24 / F^(2-2*b)
# Return the roots of the cubic equation (multiple roots)
AlphaVector <- solve(as.polynomial(c(C0, C1, C2, C3)))
# Find and return the smallest positive root
index <- which(Im(AlphaVector) == 0 & Re(AlphaVector) > 0)
Alpha <- AlphaVector[index]
if (length(Alpha) == 0) Alpha <- 0
return(min(Re(Alpha)))
}
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Re: [R] optim function multi variables -newbie
I tried to modify the code,thanks for noticing...now i get that the function cannot be evaluated at initial parameters.However I do not know what does that mean..Should I try to modify parameters. I am still not sure of syntax of function. I cannot get that optimize work correctly. I am trying to test that..however I cannot get to a result..In matlab however that works correctly...Did anybody of you tried to succesfully run it ? Michal -- View this message in context: http://r.789695.n4.nabble.com/optim-function-multi-variables-newbie-tp3242159p3244094.html Sent from the R help mailing list archive at Nabble.com. __ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
Re: [R] optim function multi variables -newbie
michalseneca gmail.com> writes: > Hi, > Basically what I am trying is to rewrite matlab code into R ...This is code > for famous SABR model Calibration. > I did most of the code up to optimalization issue. > In the attachment you can find matlab and my unfinished R code..This is very > helpful code...Basically I am trying to achieve the same results. > > Thank you very much for your help..This might help me much with my thesis > > Best regards > Michal Apparently, you are resetting the input 'params' within the function EstimateRhoAndVol() to c(0.5, 0.5) regardless of what the actual input is. No wonder that 'optim' returns the starting values: it sees a constant function. Besides that, you have to be more careful with NAs in the SABR model. Did you try out the function? --- Are you testing the list? --Hans Werner __ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
Re: [R] optim function multi variables -newbie
Hi, Basically what I am trying is to rewrite matlab code into R ...This is code for famous SABR model Calibration. I did most of the code up to optimalization issue. In the attachment you can find matlab and my unfinished R code..This is very helpful code...Basically I am trying to achieve the same results. Thank you very much for your help..This might help me much with my thesis Best regards Michal Michal http://r.789695.n4.nabble.com/file/n3242469/optimtest optimtest http://r.789695.n4.nabble.com/file/n3242469/Hagan_Figure_33.zip Hagan_Figure_33.zip -- View this message in context: http://r.789695.n4.nabble.com/optim-function-multi-variables-newbie-tp3242159p3242469.html Sent from the R help mailing list archive at Nabble.com. __ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
Re: [R] optim function multi variables -newbie
On 27.01.2011 14:08, michalseneca wrote: Hi , can i ask if somebody know the syntax for optim function with multiple variables: I have function f (params,y,g,h,j) returnig z y<-C(0.2,0.5,0.6) where params<-c(x1,x2) I define g,h,j and then I define params, then use optim to structure it ..however if i use syntax optim(params , f,y=y,g=g,h=h,j=j) to optimize params , but i got result equalling to my params ..which is kind of wrong. The syntax above is correct, hence you need to describe the problem you try to solve, ideally including the full code for f and some example data. Uwe Ligges I and if i use optim(params , f(params,y=y,g=g,h=h,j=j)) I get > Error in function (par) : could not find function "fn" how ever none of them seems to be producing meaningful results Please I am newbie and could not find a proper answer to that.. Help me.!! Thanks __ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
