M. Auer, S. Biffl:
"Fast and Flexible Libor Model Pricing: Two-Stage Monte Carlo and On-the-Fly Payoff Processing
in:"Computational Finance and Its Applications III
", C.A. Brebbia, M. Constantino, M. Larran (Hrg.); herausgegeben von: Wessex Institute; Wessex Institute Press, 2008, ISBN: 978-1-84564-111-5, S. 1 - 11.
[ Publication Database
The Libor market model is the standard interest rate model. Yet its application
relies on Monte Carlo simulation, which is slow, especially in a flexible, productindependent
This paper proposes an alternative software design of the Monte Carlo simulation
to achieve fast and flexible pricing. The design is fast because it separates the computation
of forward rate paths from that of payoffs to avoid redundant calculations; it
is flexible because it adapts to new types of payoff functions at run-time via on-the-fly
The approach is arbitrarily accurate-it supports a high discretization resolution
and even full factors without affecting the response time. It also features a smallfootprint
software design that is cheap to maintain and product-independent.