Comparison of Valuation Techniques for Interest Rate Derivatives

Ingo Beyna
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Ingo Beyna: Centre for Practical Quantitative Finance

Chapter Chapter 8 in Interest Rate Derivatives, 2013, pp 131-136 from Springer

Abstract: Abstract We summarize the features of all pricing methods concerning applicability, numerical tractability and accuracy. PDE valuation and Monte Carlo simulation can be used for plain-vanilla and exotic interest rate derivatives and yield reliable as well as adequate results in reasonable time. The assumptions within the characteristic function methodology limit its application to bonds and caplets only, and the values can be used for benchmarking and calibration.

Keywords: Monte Carlo Simulation; Price Difference; Price Error; Price Method; Zero Coupon Bond (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-34925-6_8

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DOI: 10.1007/978-3-642-34925-6_8

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