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Iterating snowballs and related path dependent callables in a multi-factor Libor model

Please always quote using this URN:urn:nbn:de:0296-matheon-3006
  • We propose a valuation method for callable structures in a multi-factor Libor model which are path-dependent in the sense that, after calling, one receives a sequence of cash-flows in the future, instead of a well specified cash-flow at the calling date. The method is based on a Monte Carlo procedure for standard Bermudans recently developed in Kolodko & Schoenmakers (2004), and is applied to the cancelable snowball interest rate swap. The proposed procedure is quite generic, straightforward to implement, and can be easily adapted to other related path-dependent products.

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Metadaten
Author:Christian Bender, Anastasia Kolodko, John Schoenmakers
URN:urn:nbn:de:0296-matheon-3006
Referee:Peter Imkeller
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2005/07/12
Release Date:2005/01/12
Tag:
Institute:Weierstraß-Institut für Angewandte Analysis und Stochastik (WIAS)
MSC-Classification:62-XX STATISTICS / 62Lxx Sequential methods / 62L15 Optimal stopping [See also 60G40, 91A60]
65-XX NUMERICAL ANALYSIS / 65Cxx Probabilistic methods, simulation and stochastic differential equations (For theoretical aspects, see 68U20 and 60H35) / 65C05 Monte Carlo methods
Preprint Number:297
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