Fast gammas for Bermudan swaptions
Adjoint differentiation is an efficient way to accurately calculate the Greeks of Libor derivatives by Monte Carlo simulation. Ralf Korn and Qian Liang extend this to calculate the gamma matrices of Bermudan swaptions more quickly than existing approaches
The market for Bermudan swaptions is a large chunk of the interest rate derivatives business, so calculation of their sensitivities is an important task for risk management. However, as their optimal exercise time is not known in advance, this is also challenging. In this article, we show how to improve the forward method approach of Korn & Liang (2013) by developing an adjoint version of the pathwise method for calculating the gamma matrix in a standard Libor market model framework. In contrast
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