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  Pricing Constant Maturity Floaters with Embeeded Options Using Monte Carlo Simulation (1999) [14 citations — 3 self]

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by Engelbert J. Dockner, Hans Moritsch
ftp://ftp.vcpc.univie.ac.at/projects/aurora/reports/auroratr1999-04.ps.gz
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Abstract:

A popular interest rate security used by Austrian banks are so called secondary market yield floaters with caps or floors or other types of path dependent embedded options. Since there are no analytical pricing formulas for these constant maturity instruments, numerical techniques have to be employed. In this paper we present Monte Carlo Simulation techniques to price these products. Because these techniques are computationally intensive, emphasis is put on a parallel implementation of these products. We find that a parallel implementation enhances the performance of the numerical analysis considerably and makes an accurate pricing of complex interest rate sensitive products possible. 1

Citations

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