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Monte Carlo market Greeks in the displaced diffusion Libor market model

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  • Mark S. Joshi, Oh Kang Kwon

Abstract

ABSTRACT This paper considers the problem of developing the sensitivities of exotic interest rate derivatives to the observed implied volatilities of caps and swaptions.We show how to compute these from the sensitivities to model volatilities in the displaced diffusion Libor market model. The example of a cancelable inverse floater is considered.

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Handle: RePEc:rsk:journ4:2160982
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