Comparing Discretization of the LIBOR Market Model in the Spot Measure

18 Pages Posted: 13 Feb 2008 Last revised: 24 Nov 2009

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

Date Written: 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.

Keywords: LIBOR market model, predictor-corrector, discretization

JEL Classification: G13

Suggested Citation

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

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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