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Comparing Discretization of the LIBOR Market Model in the Spot Measure


Christopher Beveridge


University of Melbourne - Centre for Actuarial Studies

Nick Denson


University of Melbourne - Centre for Actuarial Studies

Mark S. Joshi


University of Melbourne - Centre for Actuarial Studies
January 17, 2008


Abstract:     
Various drift approximations for the displaced-discussion LIBOR market model in the spot measure are compared. The advantages, disadvantages and implementation choices for each of predictor-corrector and the Glasserman-Zhao method are discussed. Numerical tests are carried out and we conclude that the predictor-corrector method is superior.

Number of Pages in PDF File: 18

Keywords: LIBOR market model, predictor-corrector, discretization

JEL Classification: G13

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Date posted: February 13, 2008 ; Last revised: November 24, 2009

Suggested Citation

Beveridge, Christopher, Denson, Nick and Joshi, Mark S., Comparing Discretization of the LIBOR Market Model in the Spot Measure (January 17, 2008). Available at SSRN: http://ssrn.com/abstract=1092267 or http://dx.doi.org/10.2139/ssrn.1092267

Contact Information

Christopher Beveridge
University of Melbourne - Centre for Actuarial Studies ( email )
Melbourne, 3010
Australia
Nick Denson
University of Melbourne - Centre for Actuarial Studies ( email )
Melbourne
Australia
Mark Joshi (Contact Author)
University of Melbourne - Centre for Actuarial Studies ( email )
Melbourne, 3010
Australia
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