Graphics processing unit pricing of exotic cross-currency interest rate derivatives with a foreign exchange volatility skew model

Dang, Duy-Minh, Christara, Christina C. and Jackson, Kenneth R. (2014) Graphics processing unit pricing of exotic cross-currency interest rate derivatives with a foreign exchange volatility skew model. Concurrency and Computation: Practice and Experience, 26 9: 1609-1625. doi:10.1002/cpe.2824


Author Dang, Duy-Minh
Christara, Christina C.
Jackson, Kenneth R.
Title Graphics processing unit pricing of exotic cross-currency interest rate derivatives with a foreign exchange volatility skew model
Journal name Concurrency and Computation: Practice and Experience   Check publisher's open access policy
ISSN 1532-0626
1532-0634
Publication date 2014-06-25
Year available 2012
Sub-type Article (original research)
DOI 10.1002/cpe.2824
Volume 26
Issue 9
Start page 1609
End page 1625
Total pages 17
Place of publication Chichester, West Sussex, United Kingdom
Publisher John Wiley & Sons
Collection year 2015
Language eng
Abstract We present a graphics processing unit (GPU) parallelization of the computation of the price of exotic cross-currency interest rate derivatives via a partial differential equation (PDE) approach. In particular, we focus on the GPU-based parallel pricing of long-dated foreign exchange (FX) interest rate hybrids, namely power reverse dual currency (PRDC) swaps with Bermudan cancelable features. We consider a three-factor pricing model with FX volatility skew, which results in a time-dependent parabolic PDE in three spatial dimensions. Finite difference methods on uniform grids are used for the spatial discretization of the PDE, and the alternating direction implicit (ADI) technique is employed for the time discretization. We then exploit the parallel architectural features of GPUs together with the Compute Unified Device Architecture framework to design and implement an efficient parallel algorithm for pricing PRDC swaps. Over each period of the tenor structure, we divide the pricing of a Bermudan cancelable PRDC swap into two independent pricing subproblems, each of which can efficiently be solved on a GPU via a parallelization of the ADI timestepping technique. Numerical results indicate that GPUs can provide significant increase in performance over CPUs when pricing PRDC swaps. An analysis of the impact of the FX skew on such derivatives is provided.
Keyword Alternating direction implicit (ADI)
Bermudan cancelable
Finite differences
Graphics processing units (GPUs)
Partial differential equation (PDE)
Power reverse dual currency (PRDC) swaps
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: School of Mathematics and Physics
Non HERDC
 
Versions
Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 2 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 4 times in Scopus Article | Citations
Google Scholar Search Google Scholar
Created: Wed, 17 Sep 2014, 15:51:01 EST by Kay Mackie on behalf of School of Mathematics & Physics