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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| 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 |
