WIAS Preprint No. 1061, (2005)

Iterating snowballs and related path dependent callables in a multi-factor Libor model


  • Bender, Christian
  • Kolodko, Anastasia
  • Schoenmakers, John G. M.
    ORCID: 0000-0002-4389-8266

2010 Mathematics Subject Classification

  • 91B28 62L15 65C05


  • optimal stopping, path dependent derivative, Libor market model




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 citetKSc, 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.

Appeared in

  • RISK, September 2006 pp. 126--130, under the new title: Iterating cancellable snowballs and related exotics.

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