Comparing Discretization of the LIBOR Market Model in the Spot Measure
18 Pages Posted: 13 Feb 2008 Last revised: 24 Nov 2009
Date Written: January 17, 2008
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.
Keywords: LIBOR market model, predictor-corrector, discretization
JEL Classification: G13
Suggested Citation: Suggested Citation