Journal of Computational Finance

Risk.net

Fast and accurate Greeks for the LIBOR Market Model

Nick Denson, Mark Joshi

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 log-Euler and predictor-corrector methods of obtaining Greeks, showing that both methods have the same computational order but that the latter method is much more accurate.

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