Application of Tensor Neural Networks to Pricing Bermudan Swaptions

arXiv:2304.09750v2 Announce Type: replace-cross
Abstract: The Cheyette model is a quasi-Gaussian volatility interest rate model widely used to price interest rate derivatives such as European and Bermudan Swaptions for which Monte Carlo simulation has become the industry standard. In low dimensions, these approaches provide accurate and robust prices for European Swaptions but, even in this computationally simple setting, they are known to underestimate the value of Bermudan Swaptions when using the state variables as regressors. This is mainly due to …

abstract application arxiv become cs.ce cs.lg derivatives dimensions industry low networks neural networks price pricing q-fin.cp quant-ph rate robust simulation standard tensor type