EXHIBIT 8: The Benchmark Results for the Callable Range Accrual Swap
This exhibit presents the results for model comparison. We benchmark the lattice model under different drift approximation methods with several standard market approaches, e.g., the regression-based in the full LMM and the HJM trinomial tree, for both accuracy and speed. The trade is the same as the one in Exhibit 6. The grid space is =1/8 and the number of nodes is S =200. The column ‘Dif from MC’ = 1 – (current row price) / (price of MC in LMM). All computational times are denoted in seconds on a computer with a 2.33 GHz Duo Core CPU.