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Media type:
E-Article
Title:
Monte Carlo Greeks Using the WKB Approximation
Contributor:
Byun, Suk Joon;
Kim, Jun Sik
Published:
Emerald, 2011
Published in:
Journal of Derivatives and Quantitative Studies, 19 (2011) 4, Seite 389-426
Language:
English
DOI:
10.1108/jdqs-04-2011-b0003
ISSN:
2713-6647
Origination:
Footnote:
Description:
<jats:p>In Kampen et al.(2008), Monte Carlo estimators obtained by the WKB (Wentzel, Brillouin, Kramers) approximation had better results than Monte Carlo estimators obtained by the lognormal approximation for European swaptions and Bermudan swaptions. We compare the WKB estimators with the lognormal estimators and the pathwise derivative estimators for ratchet caplets and sticky caplets with various maturities. The results show that the WKB estimators have similar performance compared with the lognormal estimators and the pathwise derivative estimators for ratchet caplets. However, the WKB estimators show worse performance than both the lognormal estimators and the pathwise derivative estimators for sticky caplets. These results indicate that the WKB estimators would be hard to substitute for the lognormal estimators for various derivatives.</jats:p>