Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities
| dc.contributor.advisor | McWalter, Tom | |
| dc.contributor.author | Morley, Niall | |
| dc.date.accessioned | 2019-02-04T11:18:06Z | |
| dc.date.available | 2019-02-04T11:18:06Z | |
| dc.date.issued | 2018 | |
| dc.date.updated | 2019-02-04T08:33:29Z | |
| dc.description.abstract | This dissertation explores a key challenge of the financial industry — the efficient computation of sensitivities of financial instruments. The adjoint approach to solving affine recursion problems (ARPs) is presented as a solution to this challenge. A Monte Carlo setting is adopted and it is illustrated how computational efficiency in sensitivity calculation may be significantly improved via the pathwise derivatives method through adapting an adjoint approach. This is achieved through the reversal of the order of differentiation in the pathwise derivatives algorithm in comparison to the standard, intuitive ‘forward’ approach. The Libor market model (LMM) framework is selected for examples to demonstrate these computational savings, with varying degrees of complexity of the LMM explored, from a one-factor model with constant volatility to a full factor model with time homogeneous volatilities. | |
| dc.identifier.apacitation | Morley, N. (2018). <i>Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities</i>. (). University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/29218 | en_ZA |
| dc.identifier.chicagocitation | Morley, Niall. <i>"Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities."</i> ., University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2018. http://hdl.handle.net/11427/29218 | en_ZA |
| dc.identifier.citation | Morley, N. 2018. Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities. University of Cape Town. | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Morley, Niall AB - This dissertation explores a key challenge of the financial industry — the efficient computation of sensitivities of financial instruments. The adjoint approach to solving affine recursion problems (ARPs) is presented as a solution to this challenge. A Monte Carlo setting is adopted and it is illustrated how computational efficiency in sensitivity calculation may be significantly improved via the pathwise derivatives method through adapting an adjoint approach. This is achieved through the reversal of the order of differentiation in the pathwise derivatives algorithm in comparison to the standard, intuitive ‘forward’ approach. The Libor market model (LMM) framework is selected for examples to demonstrate these computational savings, with varying degrees of complexity of the LMM explored, from a one-factor model with constant volatility to a full factor model with time homogeneous volatilities. DA - 2018 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2018 T1 - Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities TI - Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities UR - http://hdl.handle.net/11427/29218 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/29218 | |
| dc.identifier.vancouvercitation | Morley N. Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities. []. University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2018 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/29218 | en_ZA |
| dc.language.iso | eng | |
| dc.publisher.department | African Institute of Financial Markets and Risk Management | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.publisher.institution | University of Cape Town | |
| dc.subject.other | Mathematical Finance | |
| dc.title | Application of Adjoint Differentiation (AD) for Calculating Libor Market Model Sensitivities | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MPhil |