Variational sensitivity analysis of parametric Markovian market models
Parameter sensitivities of prices for derivative contracts play an important role in model calibration as well as in quantification of model risk. In this paper a unified approach to the efficient numerical computation of all sensitivities for Markovian market models is presented. Variational approximations of the integro-differential equations corresponding to the infinitesimal generators of the market model differentiated with respect to the model parameters are employed. Superconvergent approximations...