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2015•系统科学与信息学报(英文)Open access

A Comparison of Control Variate Methods for Pricing Interest Rate Derivatives in the LIBOR Market Model

Chenglong Xu, Wei Guan, Yijuan Liang

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Abstract

Abstract This paper studies the control variate method for pricing interest rate derivatives driven by the LIBOR market model. Several control variates are constructed based on distinctive approximations for the LIBOR market model. Numerical results show the great efficiency of our methods. The idea in this paper can also be extended to price other interest rate derivatives under the LIBOR market model, such asSwaptions, Caps, some path dependent interest rate derivatives, and so forth.

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Abstract This paper studies the control variate method for pricing interest rate derivatives driven by the LIBOR market model. Several control variates are constructed based on distinctive approximations for the LIBOR market model. Numerical results show the great efficiency of our methods. The idea in this paper can also be extended to price other interest rate derivatives under the LIBOR market model, such asSwaptions, Caps, some path dependent interest rate derivatives, and so forth.

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Available abstract

Abstract This paper studies the control variate method for pricing interest rate derivatives driven by the LIBOR market model. Several control variates are constructed based on distinctive approximations for the LIBOR market model. Numerical results show the great efficiency of our methods. The idea in this paper can also be extended to price other interest rate derivatives under the LIBOR market model, such asSwaptions, Caps, some path dependent interest rate derivatives, and so forth.

Key concepts: Libor, LIBOR market model, Interest rate derivative, Interest rate, Econometrics, Path (computing), Economics, Computer science

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