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Re: st: Solving simultaneous equations


From   Aljar Meesters <aljar.meesters@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Solving simultaneous equations
Date   Fri, 3 May 2013 19:54:48 +0200

Dear Rohit,

Your program works for me after some minor adjustments but I am using
Stata 12.1 so you may need to update (see -help update-).
The adjustments that I need to make are replacing set obs 10000 with
set obs 2 and add scalar n = 1.
You have two equations that you want to solve and thus you only need
two observations, one for each equation. The scalar n = 1 is needed
since you multiply by n by generating your a variable.
Best,

Aljar

Best,

Aljar



2013/5/3 Rohit Sonika <net@rsonika.me>:
> Hi,
>
> I have never programmed in Stata, so I am reaching out to the community for some help. Here is my problem:
>
> I have two equations, with two unknowns as follows:
>
> 1. price = val - (a/b)*(val*normal(price/strike) - strike*normal(price/strike))
> 2. sd = vol * (val/price) * (1-(a/b)*strike*normal(price/strike))
>
> The two unknowns in the above equations are 'val' and 'vol' while the other variables are observed.
>
> I am taking a numerical approach to trying to solve for above equations. Since, I create a dataset and declare variables as follows:
>
> set obs 10000
> gen double price = (100-1)*runiform()+1
> gen double strike = (100-1)*runiform()+1
> gen rate = 0.0025*int(60*runiform())
> gen double b = 100
> gen double a = (0.15-0.0001)*runiform()*n
> gen double sd = (0.30-0.05)*runiform()+0.05
>
> The program I created to populate values of 'val' and 'vol' is as follows:
>
> program nlwar
>         syntax varlist(min=1 max=1) [if], at(name)
>
>         tempname val vol
>         scalar `val' = `at'[1,1]
>         scalar `vol' = `at'[1,2]
>
>         tempvar abc
>         gen double `abc' = `val' - (a/b)*(`val'*normal(`val'/strike * `vol') - strike*normal(`val'/strike)) - price + 1 in 1
>         replace `abc' = (`vol'/sd) * (`val'/price) * (1-(a/b)*strike*normal(`val'/strike)) - 1 in 2
>
>         replace `varlist' = `abc'
> end
>
> gen y = 0
> replace y = 1 in 1
> nl war @ y, parameters(val vol) initial(val 1 vol 1)
>
> When I run the above program, Stata gives me an error stating 'verify that nlwar is a function evaluator program'.
>
> Any help on this query would be appreciated. I am using Stata version 12.
>
> Thanks!
> Rohit
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