An exact and efficient method for computing cross-Gammas of Bermudan swaptions and cancelable swaps under the Libor market model

2016 ◽  
Author(s):  
Mark Joshi ◽  
Dan Zhu
Keyword(s):  
Efficient Method ◽  
Market Model ◽  
Libor Market Model ◽  
Bermudan Swaptions

scholarly journals Fast and accurate exercise policies for Bermudan swaptions in the LIBOR market model

2016 ◽  
Vol 03 (01) ◽  
pp. 1650005 ◽  
Author(s):  
Patrik Karlsson ◽  
Shashi Jain ◽  
Cornelis W. Oosterlee
Keyword(s):  
Monte Carlo ◽  
Monte Carlo Method ◽  
Monte Carlo Simulations ◽  
Upper Bound ◽  
Market Model ◽  
Monte Carlo Approach ◽  
Lower Upper ◽  
Libor Market Model ◽  
Bermudan Swaptions

This paper describes an American Monte Carlo approach for obtaining fast and accurate exercise policies for pricing of callable LIBOR Exotics (e.g., Bermudan swaptions) in the LIBOR market model using the Stochastic Grid Bundling Method (SGBM). SGBM is a bundling and regression based Monte Carlo method where the continuation value is projected onto a space where the distribution is known. We also demonstrate an algorithm to obtain accurate and tight lower–upper bound values without the need for nested Monte Carlo simulations.

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