Forums  > Pricing & Modelling  > cheyette  
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Total Posts: 1
Joined: Jan 2019
Posted: 2019-01-19 04:11

what are the differences between BGM and Cheyette?
advantage and disadvantage using above two model ?


Total Posts: 5
Joined: Dec 2015
Posted: 2019-03-19 22:57
bgm is a market model, cheyette is a short rate model. that kind of gives away all the advantages and disadvantages for both models.

some more info:

you would not use either model to price vanillas.

cheyette is implemented via PDE, bgm is implemented via (path dependent) monte carlo.

when the exotic payoff is focused on just one rate and no correlation, you use cheyette. when there are two rates involvesd, you use bgm.

both models are slow -

problem with cheyette is solving the PDE "quickly", approximations regarding the swap rate need to be made.

problem with bgm is... problems with path dependent monte carlo... how many factors should you use? etc

... maybe one day ...


Total Posts: 402
Joined: Mar 2005
Posted: 2019-03-19 23:28
The G of BGM goes drinking with NP.

Cheyette does not.

"Yeh, after that blow out I bid the bonds at 76 and you hit man...You're 77/81 now? Cool man...What? Do I care at 80? No mate... I'm 73 bid now...I'm sure you didn't just load up just for me...".
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