Fast Delta Computations in the Swap-Rate Market Model
14 Pages Posted: 8 May 2009 Last revised: 12 Nov 2010
Date Written: May 7, 2009
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
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