Finite Difference Method for Bermudan Swaption Pricing

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Madhuvanthi Govindarajan

C++ Certificate
Joined
3/15/15
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29
Points
118
Hi Professor Duffy,

I hope you're doing well. I finished the Quantnet C++ for Financial Engineering Course around 8 months back, and joined the CMU MSCF program. I am interning in a bank in a risk modelling role right now.

I have been asked to model Bermudan Swaptions using the Finite Difference Method as a part of my internship. Having not covered the topic of FDM in my course, I thought you would be the best person I can come to for advice and guidance. Do you have any references I can use to do this task?. Any code I can use?
 
Hi Madhuvanthi,
How long does the internship last and what is the specification of the problem?

Why FDM and not LSM, for example?

Did you not do the FDM level in the QN C++ course?

Swaption PDE well known but FDM will take longer, unless you have a mentor who knows his/her stuff (an not just FD 'recipes'). That's the way I do it with MSc students in Birmingham, UK.

Any code I can use?
Of course not. Better to do it yourself.
 
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