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Deep Learning-Based BSDE Solver for Libor Market Model with Application to Bermudan Swaption Pricing and Hedging. (arXiv:1807.06622v1 [q-fin.CP])
来源于:arXiv
The Libor market model is a mainstay term structure model of interest rates
for derivatives pricing, especially for Bermudan swaptions, and other exotic
Libor callable derivatives. For numerical implementation the pricing of
derivatives with Libor market models is mainly carried out with Monte Carlo
simulation. The PDE grid approach is not particularly feasible due to Curse of
Dimensionality. The standard Monte Carlo method for American/Bermudan swaption
pricing more or less uses regression to estimate expected value as a linear
combination of basis functions (Longstaff and Schwartz). However, Monte Carlo
method only provides the lower bound for American option price. Another
complexity is the computation of the sensitivities of the option, the so-called
Greeks, which are fundamental for a trader's hedging activity. Recently, an
alternative numerical method based on deep learning and backward stochastic
differential equations appeared in quite a few researches. For European style
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