Investment Company Calibrate Nonlinear Least Squares Problem with NAG® Library Optimization Solvers

Global Investment Company Exane use NAG® Library optimization solvers to calibrate parametric arbitrage-free volatility surfaces. After a testing phase including benchmarking NAG solvers against other numerical libraries, and open-source alternatives, the NAG® Library was selected for its performance, efficiency, and reliability.

Exane specialize in three finance areas: Cash Equities, Derivatives and Asset Management, and it was within the Equity Derivatives function that Exane benefitted from using NAG’s superior optimization solvers.

The Challenge

The Exane Quant Team for Equity Derivatives needed to quickly, efficiently and, on a continuous basis, solve a constrained nonlinear least squares optimization problem with approximately 50 parameters, 100 linear constraints and 100 nonlinear constraints.

The Solution

Having previously used NAG® Library routines in other applications, Exane team members selected NAG® Library optimization routines and conducted an extensive test phase, including pitching them against other numerical libraries and several open-source alternatives. During the testing phase NAG helped the Exane team achieve a proof of concept, overcoming the initial complexity challenges. At evaluation finish NAG was chosen to supply their solvers for a host of reasons including the extensive algorithmic coverage found in the NAG® Library. The Library offers numerous algorithms for the same class of problems giving increased user choice when selecting the right solver for the problem. In addition NAG delivered:

  • Assistance solving convergence issues
  • Development help: the intelligent monitoring possibilities in the NAG® Library, including verbose loggings, assisted during development
  • Full reproducibility and robustness across platforms (x32 and x64)

Speaking of the NAG® Library, Christian Marzolin, Head of the Quant Team for Equity Derivatives at Exane said, “After more than one year in production, the NAG® Library has given us full satisfaction in terms of performance and reliability. With the reactivity of the technical support team we have been able to progressively improve the quality of our results. I strongly recommend others to try it out.”