EXHIBIT 7: The Benchmark Results for the Callable Capped Floater
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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 5. The grid space is =1/8 and the number
of nodes is S =200. PC denotes Predictor-Corrector. 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.