Economics - Research Publications

Permanent URI for this collection

http://hdl.handle.net/11343/417

Filters

2006 4
Reset filters

Settings
Statistics
Citations
Start date: 2003 × End date: 2010 × Author: Joshi, Mark × Type: Preprint ×

Search Results

Now showing 1 - 4 of 4
  • Item
    Thumbnail Image
    Achieving decorrelation and speed simultaneously in the LIBOR market model
    Joshi, Mark S. ( 2006-03)
    An algorithm for computing the drift in the LIBORmarket model with additional idiosynchratic terms is introduced.This algorithm achieves a computational complexity of order equalto the number of common factors times the number of rates. Itis demonstrated that this allows better matching of correlation matrices in reduced-factor models.
  • Item
    Thumbnail Image
    Intensity gamma: a new approach to pricing portfolio credit derivatives
    Joshi, Mark S. ; Stacey, Alan M. ( 2006-03)
    We develop a completely new model for correlation of credit defaults basedon a financially intuitive concept of business time similar to that in the Variance Gammamodel for stock price evolution. Solving a simple equation calibrates each name to itscredit spread curve and we show that the overall model can be calibrated to the marketbase correlation curve of a tranched CDO index. Once this calibration is performed,obtaining consistent arbitrage-free prices for non-standard tranches, products based ondifferent underlying names and even more exotic products such as CDO2 is straightforward and rapid.
  • Item
    Thumbnail Image
    Effective implementation of generic market models
    Joshi, Mark S. ; Liesch, Lorenzo ( 2006-03)
    A number of standard market models are studied. Foreach one, algorithms of computational complexity equal to thenumber of rates times the number of factors to carry out the computationsfor each step is introduced. Two new classes of marketmodels are developed and it is shown for them that similar results hold.
  • Item
    Thumbnail Image
    A simple derivation of and improvements to Jamshidian’s and Rogers’ upper bound methods for Bermudan options
    Joshi, Mark S. ( 2006-03)
    The additive method for upper bounds for Bermudanoptions is rephrased in terms of buyer’s and seller’s prices. It isshown how to deduce Jamshidian’s upper bound result in a simplefashion from the additive method, including the case of possiblyzero final pay-off. Both methods are improved by ruling out exerciseat sub-optimal points. It is also shown that it is possible to usesub- Monte Carlo simulations to estimate the value of the hedgingportfolio at intermediate points in the Jamshidian method withoutjeopardizing its status as upper bound.