Optimal Limit Methods for Computing Sensitivities of

Jiun Hong Chan and Mark Joshi
Authors registered in the RePEc Author Service: Mark Joshi

No 1142, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: We introduce a new approach to computing sensitivities of discontinuous integrals.The methodology is generic in that it only requires knowledge of the simulation scheme and the location of the integrand's singularities. The methodology is proven to be optimal in terms of minimizing the variance of the measure changes caused by the elimination of the discontinuities for finite bump sizes. An efficient adjoint implementation of the small bump-size limit is discussed, and the method is shown to be effective for a number of natural examples involving triggerable interest rate derivative securities.

Keywords: Price Sensitivities; Monte-Carlo Greeks; Partial Proxy Simulation Scheme; Minimal Partial (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://fbe.unimelb.edu.au/economics/research/workingpapers (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://fbe.unimelb.edu.au/economics/research/workingpapers [301 Moved Permanently]--> https://fbe.unimelb.edu.au/economics/research/workingpapers)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1142

Access Statistics for this paper

More papers in Department of Economics - Working Papers Series from The University of Melbourne Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Dandapani Lokanathan ().