Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia
Monte Carlo market Greeks in the displaced diffusion Libor market model
Mark S. Joshi, Oh Kang Kwon
Abstract
ABSTRACT
This paper considers the problem of developing the sensitivities of exotic interest rate derivatives to the observed implied volatilities of caps and swaptions.We show how to compute these from the sensitivities to model volatilities in the displaced diffusion Libor market model. The example of a cancelable inverse floater is considered.
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