Iterating cancellable snowballs and related exotics

Effective valuation procedures for callable exotics are a thorny problem. Standard methods reveal limitations in pricing many-dimensional and path-dependent products, such as cancellable snowballs. Christian Bender, Anastasia Kolodko and John Schoenmakers ally these methods with their recent iterative methodology to fill the final gap

This article proposes a valuation method for exotic cancellable and callable structures in a multi-factor Libor model. These structures are path-dependent in the sense that, after cancelling or calling, one cancels a sequence of cashflows or receives a sequence of cashflows in the future, respectively. The method combines a Monte Carlo improvement procedure for standard Bermudans developed and