Fast Monte Carlo Bermudan Greeks

In recent years, much effort has been devoted to improving the efficiency of the Libor market model. Matthias Leclerc, Qian Liang and Ingo Schneider extend the pioneering work of Giles & Glasserman (2006) and show how fast calculations of Monte Carlo Greeks are feasible even within the framework of Bermudan-style derivatives. The authors demonstrate the efficiency gains in detail

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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