FAST MONTE CARLO GREEKS FOR FINANCIAL PRODUCTS WITH DISCONTINUOUS PAY‐OFFS

Abstract

We introduce a new class of numerical schemes for discretizing processes driven by Brownian motions. These allow the rapid computation of sensitivities of discontinuous integrals using pathwise methods even when the underlying densities post-discretization are singular. The two new methods presented in this paper allow Greeks for financial products with trigger features to be computed in the LIBOR market model with similar speed to that obtained by using the adjoint method for continuous pay-offs. The methods are generic with the main constraint being that the discontinuities at each step must be determined by a one-dimensional function: the proxy constraint. They are also generic with the sole interaction between the integrand and the scheme being the specification of this constraint.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 21 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.