School Seminars and Colloquia

Fast computation of Greeks for Markov-funcional models using adjoint PDE methods

Stochastic Processes and Financial Mathematics

by Nick Denson

Institution: Centre for Actuarial Studies, The University of Melbourne
Date: Mon 24th May 2010
Time: 3:15 PM
Location: Alice Hoy-325, The University of Melbourne

Abstract: This paper demonstrates how the adjoint PDE method can be used to compute Greeks in Markov-functional models. This is an accurate and efficient way to compute Greeks, where most of the model sensitivities can be computed in approximately the same time as a single sensitivity using finite difference. We demonstrate the speed and accuracy of the method using a Markov-functional interest rate model, also demonstrating how the model Greeks can be converted into market Greeks.

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