This paper presents an extensive test of the Libor Market on the Euro Cap and Swaption market. The deterministic LIBOR market model prices OTC cap exactly and prices OTC swaptions with errors well below two basis points. Tests for the hedging performance show that the deterministic LIBOR market...

A great deal of recent literature discusses the major anomalies that have appeared in the interest rate market following the credit crunch in August 2007. There were major consequences with regard to the development of spreads between quantities that had remained the same until then. In...

We discuss the pricing of cancellable swaps using the displaced diffusion LIBOR market model using a multi-core graphics card. We demonstrate that over one hundred times speed up can be achieved in a realistic case

This paper describes an American Monte Carlo approach for obtaining fast and accurate exercise policies for pricing of callable LIBOR Exotics (e.g., Bermudan swaptions) in the LIBOR market model using the Stochastic Grid Bundling Method (SGBM). SGBM is a bundling and regression based Monte Carlo...

We introduce a new simulation algorithm for computing the Hessians of Bermudan swaptions and cancellable swaps, the resulting pathwise estimates are unbiased and accurate. Given the exercise strategy, the pathwise angularities are removed by a sequence of measure changes. The change of measure...