Sydney Financial Mathematics Workshop

Sponsored by

Westpac


Implementing Market Models

Mark Joshi
The University of Melbourne

Time: 5:15--7:00 pm
Date: Wednesday 31 May 2006
Venue: Level 1, Westpac Place, 275 Kent Street, Sydney

Abstract

  1. Fast drift computation in generic market models. We show that all the drifts can be computed with number of factors times number of rates for a number of market models including the LIBOR market model. This beats the naive approach which takes order rates-squared computations.
  2. Effective drift approximations for evolving the LIBOR market model. We introduce a new drift approximation which is more effective than predictor-corrector and other known techniques.
  3. Lower bounds for callable derivatives in market models. We discuss extensions to Longstaff-Schwartz.
  4. Upper bounds for callable derivatives in market models. We reinterpret existing upper bound methods in terms of the seller's price and extend them to encompass callable products with non-analytic path-dependent payoffs.

  5. Please feel free to bring this to the attention of interested colleagues.