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Efficient Greek Estimation in Generic Swap-Rate Market ModelsMark S. JoshiUniversity of Melbourne - Centre for Actuarial Studies Chao YangUniversity of Melbourne - Centre for Actuarial Studies March 1, 2011 Algorithmic Finance, Vol. 1, No. 1, 2011 Abstract: We first develop an efficient algorithm to compute Deltas of interest rate derivatives for a number of standard market models. The computational complexity of the algorithms is shown to be proportional to the number of rates times the number of factors per step. We then show how to extend the method to efficiently compute Vegas in those market models.
Number of Pages in PDF File: 18 Keywords: algorithmic finance, adjoint method, delta, vega, computational order, market model, Monte Carlo simulation JEL Classification: G13 Accepted Paper SeriesDate posted: March 2, 2011Suggested Citation |
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