Kernel-based collocation methods for Heath-Jarrow-Morton models with Musiela parametrization
Computational Finance
2020-09-08 v4 Numerical Analysis
Numerical Analysis
Probability
Abstract
We propose kernel-based collocation methods for numerical solutions to Heath-Jarrow-Morton models with Musiela parametrization. The methods can be seen as the Euler-Maruyama approximation of some finite dimensional stochastic differential equations, and allow us to compute the derivative prices by the usual Monte Carlo methods. We derive a bound on the rate of convergence under some decay condition on the inverse of the interpolation matrix and some regularity conditions on the volatility functionals.
Cite
@article{arxiv.1809.05643,
title = {Kernel-based collocation methods for Heath-Jarrow-Morton models with Musiela parametrization},
author = {Yuki Kinoshita and Yumiharu Nakano},
journal= {arXiv preprint arXiv:1809.05643},
year = {2020}
}