Fast Delta Computations in the Swap-Rate Market Model

14 Pages Posted: 8 May 2009 Last revised: 12 Nov 2010

See all articles by Mark S. Joshi

Mark S. Joshi

University of Melbourne - Centre for Actuarial Studies (deceased)

Chao Yang

Origin Energy

Date Written: May 7, 2009

Abstract

We develop an efficient algorithm to implement the adjoint method that computes sensitivities of an interest rate derivative (IRD) with respect to different underlying rates in the co-terminal swap-rate market model. The order of computation per step of the new method is shown to be proportional to the number of rates times the number of factors, which is the same as the order in the LIBOR market model.

Keywords: adjoint method, Delta, computational order, market model, Monte Carlo simulation

JEL Classification: G13

Suggested Citation

Joshi, Mark and Yang, Chao, Fast Delta Computations in the Swap-Rate Market Model (May 7, 2009). Available at SSRN: https://ssrn.com/abstract=1401094 or http://dx.doi.org/10.2139/ssrn.1401094

Mark Joshi (Contact Author)

University of Melbourne - Centre for Actuarial Studies (deceased) ( email )

Melbourne, 3010
Australia

Chao Yang

Origin Energy ( email )

Sydney
Australia

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