Iterating snowballs and related path dependent callables in a multi-factor Libor model
Christian Bender, Anastasia Kolodko, John G. M. Schoenmakers · 2005
We propose a valuation method for callable structures in a multi-factor Libor model which are path-dependent in the sense that, after calling, one receives a sequence of cash-flows in the future, instead of a well specified cash-flow at the calling date. The method is based on a Monte Carlo procedure for standard Bermudans recently developed in \citet{KSc}, and is applied to the cancelable snowball interest rate swap. The proposed procedure is quite generic, straightforward to implement, and can be easily adapted to other related path-dependent products.