27 Pages Posted: 24 Jul 2009
Date Written: July 23, 2009
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.
Keywords: adjoint method, Delta, Vega, computational order, market model, Monte Carlo simulation
JEL Classification: G13
Suggested Citation: Suggested Citation