Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model

Nan Zhang; Ka Lok Man; Eng Gee Lim

doi:10.1007/978-3-642-35606-3_56

Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model

Nan Zhang^*
, Ka Lok Man
, Eng Gee Lim

^*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceeding › Conference Proceeding › peer-review

1 Citation (Scopus)

Abstract

We present a parallel algorithm and its implementation that computes lower and upper bounds for prices of Bermudan swaptions. The evolving of the underlying forward rates is assumed to follow the extended multi-factor LIBOR market model.We follow the Longstaff-Schwartz least-squares approach in computing a lower bound and the Andersen-Broadie duality-based procedure in computing an upper bound. Parallelisation in the implementation is achieved through POSIX threading. High-performance Intel MKL functions are used for regression and linear algebra operations. The parallel implementation was tested using Bermudan swaptions with different parameters on Intel multi-core machines. In all the tests the parallel program produced close results to those reported in the previous studies. Significant speedups were observed against an efficient sequential implementation built for comparison.

Original language	English
Title of host publication	Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings
Pages	472-481
Number of pages	10
DOIs	https://doi.org/10.1007/978-3-642-35606-3_56
Publication status	Published - 2012
Event	9th IFIP International Conference on Network and Parallel Computing, NPC 2012 - Gwangju, Korea, Republic of Duration: 6 Sept 2012 → 8 Sept 2012

Publication series

Name	Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume	7513 LNCS
ISSN (Print)	0302-9743
ISSN (Electronic)	1611-3349

Conference

Conference	9th IFIP International Conference on Network and Parallel Computing, NPC 2012
Country/Territory	Korea, Republic of
City	Gwangju
Period	6/09/12 → 8/09/12

Keywords

Bermudan swaption pricing
LIBOR market model
Monte Carlo simulation
Parallel computing

Access to Document

10.1007/978-3-642-35606-3_56

Cite this

Zhang, N., Man, K. L., & Lim, E. G. (2012). Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model. In Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings (pp. 472-481). (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 7513 LNCS). https://doi.org/10.1007/978-3-642-35606-3_56

Zhang, Nan ; Man, Ka Lok ; Lim, Eng Gee. / Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model. Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings. 2012. pp. 472-481 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)).

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title = "Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model",

abstract = "We present a parallel algorithm and its implementation that computes lower and upper bounds for prices of Bermudan swaptions. The evolving of the underlying forward rates is assumed to follow the extended multi-factor LIBOR market model.We follow the Longstaff-Schwartz least-squares approach in computing a lower bound and the Andersen-Broadie duality-based procedure in computing an upper bound. Parallelisation in the implementation is achieved through POSIX threading. High-performance Intel MKL functions are used for regression and linear algebra operations. The parallel implementation was tested using Bermudan swaptions with different parameters on Intel multi-core machines. In all the tests the parallel program produced close results to those reported in the previous studies. Significant speedups were observed against an efficient sequential implementation built for comparison.",

keywords = "Bermudan swaption pricing, LIBOR market model, Monte Carlo simulation, Parallel computing",

author = "Nan Zhang and Man, \{Ka Lok\} and Lim, \{Eng Gee\}",

year = "2012",

doi = "10.1007/978-3-642-35606-3\_56",

language = "English",

isbn = "9783642356056",

series = "Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)",

pages = "472--481",

booktitle = "Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings",

note = "9th IFIP International Conference on Network and Parallel Computing, NPC 2012 ; Conference date: 06-09-2012 Through 08-09-2012",

}

Zhang, N, Man, KL & Lim, EG 2012, Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model. in Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings. Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics), vol. 7513 LNCS, pp. 472-481, 9th IFIP International Conference on Network and Parallel Computing, NPC 2012, Gwangju, Korea, Republic of, 6/09/12. https://doi.org/10.1007/978-3-642-35606-3_56

Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model. / Zhang, Nan; Man, Ka Lok ; Lim, Eng Gee.
Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings. 2012. p. 472-481 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 7513 LNCS).

Research output: Chapter in Book or Report/Conference proceeding › Conference Proceeding › peer-review

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AU - Man, Ka Lok

AU - Lim, Eng Gee

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N2 - We present a parallel algorithm and its implementation that computes lower and upper bounds for prices of Bermudan swaptions. The evolving of the underlying forward rates is assumed to follow the extended multi-factor LIBOR market model.We follow the Longstaff-Schwartz least-squares approach in computing a lower bound and the Andersen-Broadie duality-based procedure in computing an upper bound. Parallelisation in the implementation is achieved through POSIX threading. High-performance Intel MKL functions are used for regression and linear algebra operations. The parallel implementation was tested using Bermudan swaptions with different parameters on Intel multi-core machines. In all the tests the parallel program produced close results to those reported in the previous studies. Significant speedups were observed against an efficient sequential implementation built for comparison.

AB - We present a parallel algorithm and its implementation that computes lower and upper bounds for prices of Bermudan swaptions. The evolving of the underlying forward rates is assumed to follow the extended multi-factor LIBOR market model.We follow the Longstaff-Schwartz least-squares approach in computing a lower bound and the Andersen-Broadie duality-based procedure in computing an upper bound. Parallelisation in the implementation is achieved through POSIX threading. High-performance Intel MKL functions are used for regression and linear algebra operations. The parallel implementation was tested using Bermudan swaptions with different parameters on Intel multi-core machines. In all the tests the parallel program produced close results to those reported in the previous studies. Significant speedups were observed against an efficient sequential implementation built for comparison.

KW - Bermudan swaption pricing

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KW - Monte Carlo simulation

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T3 - Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)

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Zhang N, Man KL , Lim EG. Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model. In Network and Parallel Computing - 9th IFIP International Conference, NPC 2012, Proceedings. 2012. p. 472-481. (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)). doi: 10.1007/978-3-642-35606-3_56

Pricing Bermudan interest rate swaptions via parallel simulation under the extended multi-factor LIBOR market model

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