Fast and Accurate Greeks for the Libor Market Model

20 Pages Posted: 13 Aug 2009

See all articles by Nick Denson

Nick Denson

University of Melbourne - Centre for Actuarial Studies

Mark S. Joshi

University of Melbourne - Centre for Actuarial Studies (deceased)

Date Written: August 13, 2009

Abstract

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

Suggested Citation

Denson, Nick and Joshi, Mark, Fast and Accurate Greeks for the Libor Market Model (August 13, 2009). Available at SSRN: https://ssrn.com/abstract=1448333 or http://dx.doi.org/10.2139/ssrn.1448333

Nick Denson (Contact Author)

University of Melbourne - Centre for Actuarial Studies ( email )

Melbourne
Australia

Mark Joshi

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

Melbourne, 3010
Australia

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