Lognormal random field approximations to LIBOR market models

O. Kurbanmuradov ...

We study several approximations for the LIBOR market models presented in Brace, Gatarek, Musiela (1997), Jamshidian (1997) and Schoenmakers, Coffey (1999). Special attention is payed to log-normal approximations and their simulation by using direct simulation methods for log-normal random fields. In contrast to the conventional numerical solution of SDE's this approach simulates the solution directly at the desired point and is therefore much more efficient. We carry out a path-wise comparison of the approximations and give applications to the valuation of the swaption and the trigger swap.

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Year of publication:	1999 ; [Elektronische Ressource]
Other Persons:	Kurbanmuradov, O. (contributor) ; Sabelfeld, K. (contributor) ; Schoenmakers, John (contributor)
Institutions:	Weierstraß-Institut für Angewandte Analysis und Stochastik (contributor)
Publisher:	Berlin : Weierstraß-Inst. für Angewandte Analysis und Stochastik Göttingen : Niedersächsische Staats- und Universitätsbibliothek
Subject:	Stochastic differential equation \| Zinsderivat \| Interest rate derivative \| Arbitrage Pricing \| Arbitrage pricing \| Optionspreistheorie \| Option pricing theory \| Simulation \| Stochastischer Prozess \| Stochastic process \| Theorie \| Theory \| Zinsstruktur \| Yield curve

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