Partial proxy simulation schemes for generic and robust Monte Carlo Greeks

Christian P. Fries and Mark S. Joshi

Journal of Computational Finance

Abstract: ABSTRACT We consider a generic framework that allows us to calculate robust Monte Carlo sensitivities seamlessly through simple finite difference approximation. The method proposed is a generalization and improvement of the proxy simulation scheme method (Fries and Kampen (2007)). As a benchmark we apply the method to the pricing of digital caplets and target redemption notes using LIBOR and CMS indexes under a LIBOR market model. We calculate stable deltas, gammas and vegas by applying direct finite difference to the proxy simulation scheme pricing. The framework is generic in the sense that it is model and almost product independent. The only product-dependent part is the specification of the proxy constraint. This allows for an elegant implementation, where new products may be included at small additional costs.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-computational-fina ... t-monte-carlo-greeks (text/html)

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:rsk:journ0:2160355

Access Statistics for this article

More articles in Journal of Computational Finance from Journal of Computational Finance
Bibliographic data for series maintained by Thomas Paine ().