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Model[Storage_Option]"Model[Storage Option]" is a special type of Model that represents all modelling assumptions needed in valuation algorithms concerning objects of type Storage Option.
Corresponds to the QuantLib FdSimpleExtOUStorage Engine, which is based on a one-factor finite differences discretization method.
Note this engine still lies in the QuantLib's experimental folder, which means it has not been adequately tested!
This model assumes the underlying price follows an Ornstein Uhlenbeck stochastic process (details in OU Process), which is then discritized using a 1-factor finite differences grid.
As such, no dividend yield (or storage cost), spot underlying price or volatility are required as input in the market data.
The burden falls upon specifying the parameters of the stochastic process.
No calibration routine is currently available.
One may use the Excel solver to fine tune some of the parameters by pricing storage options whose price is known, for example storage options with one allowed exercise that behave like vanilla european options.
The following quantities may be also calculated and reported along the price.
The output refers to the price of the referenced tradable contract.
The quantities listed in FDVanilla Extra Data are reportable when Finite Differences is used.