Fast and Accurate Greeks for the Libor Market Model
20 Pages Posted: 13 Aug 2009
Date Written: August 13, 2009
This paper derives the pathwise adjoint method for the predictor-corrector drift approximation in the displaced-diffusion LIBOR market model. We present a comparison of the Greeks between log-Euler and predictor-corrector, showing both methods have the same computational order but the latter to be much more accurate.
Keywords: LIBOR market model, LMM, BGM, Greeks, delta, vega, pathwise method, predictor-corrector
JEL Classification: G13
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