Estimations of risk measures for Bermudan swaptions

Specialeforsvar: Christoffer Kinttof Øhlenschlæger

Titel: Estimations of risk measures for Bermudan swaptions

Abstract: This thesis introduces the Stochastic Grid Bundling Method, the Least Squared Method and the Chebyshev algorithm to estimate the time zero value, EE, MP F E and CV A of Bermudan swaptions when the interest rate follows the Hull-White dynamic. The three different algorithms are afterwards analyzed and compared. At last, the algorithms are tested in simulation experiments. The mains findings of the experiments are that Stochastic Grid Bundle Method is the most accurate but also the slowest, and that 100 · 102 generated paths might be sufficient to use instead of 100 · 103 , which are used in Feng et al. (2016).

Vejleder: David Glavind Skovmand
Censor:   Thomas Kokholm, Aarhus Universitet