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andcoo01
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Posts: 63
Joined: January 7th, 2008, 9:49 am

calculating stable vega in LMM

June 17th, 2008, 3:53 pm

I am trying to calculate a stable vega in a LIBOR market model setting. The other greeks (delta and gamma) can be calculated by using a liklihood ratio method with full factor on only the first step and then (typically) factor 3 for the other steps. But how can one calculate vega? Using the likelihood ratio method seems impractical since one would have to use a complete full factor model (volatility not just in the first step), is there any other way?Thanks,Andrew Cooke
 
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unkpath
Posts: 289
Joined: January 13th, 2004, 8:44 pm

calculating stable vega in LMM

June 18th, 2008, 12:05 am

check your PM
 
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Clopinette
Posts: 258
Joined: February 25th, 2002, 5:34 pm

calculating stable vega in LMM

June 18th, 2008, 12:32 pm

You may want to try the pathwise method
 
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mj
Posts: 3449
Joined: December 20th, 2001, 12:32 pm

calculating stable vega in LMM

June 24th, 2008, 3:38 am

partial proxy simulation
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