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| Tekijä: | Pietersz, R. Pelsser, A. |
| Otsikko: | Swap vega in BGM: pitfalls and alternatives |
| Lehti: | Risk
2004 : MAR, VOL. 17:3, p. 91-93 |
| Asiasana: | Risk management Interest rates Financial markets Models |
| Kieli: | eng |
| Tiivistelmä: | Practitioners developing the Libor BMG model for risk management of a swap-based interest rate derivative be warned: for certain volatility (here as: vol.) functions the estimate of swap vega may be poor. This may occur for time-homogeneous forward or swap-rate vol., but it does not occur for constant vol. This article presents a method of estimating vega with clarity at a low number of simulation paths for all vol. functions. |
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