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Monte Carlo Simulation with an Asymptotic Expansion in HJM Framework

Author

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  • Akihiko Takahashi
  • Shuichiro Matsushima

Abstract

We developed a variance reduction method of Monte Carlo simulations as well as an approximation formula based on an asymptotic expansion approach for pricing bond options and swaptions in HJM framework. As a numerical example we applied the technique to a realistic two-factor model and confirmed its validity.

Suggested Citation

  • Akihiko Takahashi & Shuichiro Matsushima, 2004. "Monte Carlo Simulation with an Asymptotic Expansion in HJM Framework," CARF J-Series CARF-J-005, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:jseres:cj005
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    File URL: http://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/jseries/5.pdf
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    Cited by:

    1. Akihiko Takahashi & Masashi Toda, 2012. "Note on an Extension of an Asymptotic Expansion Scheme," CARF F-Series CARF-F-286, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Dec 2012.
    2. Akihiko Takahashi & Masashi Toda, 2013. "Note on an Extension of an Asymptotic Expansion Scheme," CARF F-Series CARF-F-312, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. Akihiko Takahashi & Yukihiro Tsuzuki, 2013. "A New Improvement Scheme for Approximation Methods of Probability Density Functions," CIRJE F-Series CIRJE-F-874, CIRJE, Faculty of Economics, University of Tokyo.
    4. Akihiko Takahashi & Yukihiro Tsuzuki, 2013. "A New Improvement Scheme for Approximation Methods of Probability Density Functions," CARF F-Series CARF-F-305, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. Akihiko Takahashi & Masashi Toda, 2012. "Note on an Extension of an Asymptotic Expansion Scheme," CIRJE F-Series CIRJE-F-860, CIRJE, Faculty of Economics, University of Tokyo.
    6. Akihiko Takahashi & Masashi Toda, 2013. "Note On An Extension Of An Asymptotic Expansion Scheme," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 16(05), pages 1-23.
    7. Ryosuke Matsuoka & Akihiko Takahashi & Yoshihiko Uchida, 2004. "A New Computational Scheme for Computing Greeks by the Asymptotic Expansion Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 11(4), pages 393-430, December.
    8. Akihiko Takahashi & Kohta Takehara & Masashi Toda, 2009. "Computation in an Asymptotic Expansion Method," CIRJE F-Series CIRJE-F-621, CIRJE, Faculty of Economics, University of Tokyo.
    9. Akihiko Takahashi, 2015. "Asymptotic Expansion Approach in Finance," CARF F-Series CARF-F-356, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Aug 2015.
    10. Akihiko Takahashi & Kohta Takehara & Masashi Toda, 2009. "Computation in an Asymptotic Expansion Method," CARF F-Series CARF-F-149, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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