Fast Monte Carlo Bermudan Greeks

Cutting Edge - Interest Rates

Fast pricing and calculating hedging parameters are still a challenge in the framework of the Libor market model (LMM), which has become the fundamental pricing model in the fixed-income environment. Traditionally, for fixed-income securities, Greeks are calculated by the so-called bump and revalue method: each initial forward rate is perturbed by a basis-point shift and then the security is valued again. Besides the simplicity, there is no further advantage. The LMM is usually implemented with

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