Re: LMM and finite difference methods

Posted by Luigi Ballabio on Nov 15, 2005; 1:40am
URL: http://quantlib.414.s1.nabble.com/LMM-and-finite-difference-methods-tp4222p4226.html

On 11/15/2005 10:21:39 AM, Ferdinando Ametrano wrote:
> On 11/15/05, Joseph Wang <[hidden email]> wrote:
> > Here is a silly question.  Why is it that LMM methods are used only
> > with Monte Carlo and not with finite difference methods.
>
> LMM are intrinsically high-dimension. If you model the 30-year yield
> curve as a strip of 6-month forward libor you have 60 factors. FD  
> with more than 3 factors are less efficient than MC, and very hard  
> (almost impossible?) to implement.

Ok, so that was your question.

Note to self: don't answer email before coffee.

Later,
        Luigi

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