Kernel-based collocation methods for Heath-Jarrow-Morton models with Musiela parametrization

Yuki Kinoshita; Yumiharu Nakano

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arXiv · 1809.05643

Kernel-based collocation methods for Heath-Jarrow-Morton models with Musiela parametrization

Yuki Kinoshita·Yumiharu Nakano

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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.

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q-fin.CP cs.NA math.NA math.PR

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BibTeX RIS

Yuki Kinoshita, Yumiharu Nakano. 2018-09-15. Kernel-based collocation methods for Heath-Jarrow-Morton models with Musiela parametrization. https://arxiv.org/abs/1809.05643

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