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Efficient Greek Estimation in Generic Swap-Rate Market Models

18 Pages Posted: 2 Mar 2011  

Mark S. Joshi

University of Melbourne - Centre for Actuarial Studies

Chao Yang

Origin Energy

Date Written: March 1, 2011

Abstract

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: algorithmic finance, adjoint method, delta, vega, computational order, market model, Monte Carlo simulation

JEL Classification: G13

Suggested Citation

Joshi, Mark S. and Yang, Chao, Efficient Greek Estimation in Generic Swap-Rate Market Models (March 1, 2011). Algorithmic Finance, Vol. 1, No. 1, 2011. Available at SSRN: https://ssrn.com/abstract=1773942

Mark Joshi (Contact Author)

University of Melbourne - Centre for Actuarial Studies ( email )

Melbourne, 3010
Australia

Chao Yang

Origin Energy ( email )

Sydney
Australia

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