Smoking adjoints: fast Monte Carlo Greeks

Monte Carlo calculation of price sensitivities for hedging is often very time-consuming. Michael Giles and Paul Glasserman develop an adjoint method to accelerate the calculation. The method is particularly effective in estimating sensitivities to a large number of inputs, such as initial rates on a forward curve or points on a volatility surface. The authors apply the method to the Libor market model and show that it is much faster than previous methods

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