School Seminars and Colloquia

Limit Proxy Methods for Fast Monte-Carlo Greeks

Stochastic Processes and Financial Mathematics

by Jiun Hong Chan


Institution: The Centre for Actuarial Studies, The University of Melbourne
Date: Wed 13th April 2011
Time: 1:00 PM
Location: Old Geology Theatre 2, The University of Melbourne

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.

For More Information: contact: Prof Daniel Dufresne at dufresne@unimelb.edu.au OR Dr Aihua Xia at xia@ms.unimelb.edu.au