Robust Libor Modelling And Pricing Of Derivative Products
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Robust Libor Modelling And Pricing Of Derivative Products
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Author : John Schoenmakers
language : en
Publisher: CRC Press
Release Date : 2005-03-29
Robust Libor Modelling And Pricing Of Derivative Products written by John Schoenmakers and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-03-29 with Business & Economics categories.
One of Riskbook.com's Best of 2005 - Top Ten Finance Books The Libor market model remains one of the most popular and advanced tools for modelling interest rates and interest rate derivatives, but finding a useful procedure for calibrating the model has been a perennial problem. Also the respective pricing of exotic derivative products such
Robust Libor Modelling And Pricing Of Derivative Products
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Author : John G. M.. Schoenmakers
language : en
Publisher:
Release Date : 2005
Robust Libor Modelling And Pricing Of Derivative Products written by John G. M.. Schoenmakers and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Derivative securities categories.
Robust Calibration Of The Libor Market Model And Pricing Of Derivative Products
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Author : Dennis Schätz
language : en
Publisher:
Release Date : 2011
Robust Calibration Of The Libor Market Model And Pricing Of Derivative Products written by Dennis Schätz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Robust Libor Modelling And Pricing Of Derivative Products
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Author : John Schoenmakers
language : en
Publisher: CRC Press
Release Date : 2005-03-29
Robust Libor Modelling And Pricing Of Derivative Products written by John Schoenmakers and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-03-29 with Mathematics categories.
One of Riskbook.com's Best of 2005 - Top Ten Finance Books The Libor market model remains one of the most popular and advanced tools for modelling interest rates and interest rate derivatives, but finding a useful procedure for calibrating the model has been a perennial problem. Also the respective pricing of exotic derivative products such as Bermudan callable structures is considered highly non-trivial. In recent studies, author John Schoenmakers and his colleagues developed a fast and robust implied method for calibrating the Libor model and a new generic procedure for the pricing of callable derivative instruments in this model. Within a compact, self-contained review of the requisite mathematical theory on interest rate modelling, Robust Libor Modelling and Pricing of Derivative Products introduces the author's new approaches and their impact on Libor modelling and derivative pricing. Discussions include economically sensible parametrisations of the Libor market model, stability issues connected to direct least-squares calibration methods, European and Bermudan style exotics pricing, and lognormal approximations suitable for the Libor market model. A look at the available literature on Libor modelling shows that the issues surrounding instabilty of calibration and its consequences have not been well documented, and an effective general approach for treating Bermudan callable Libor products has been missing. This book fills these gaps and with clear illustrations, examples, and explanations, offers new methods that surmount some of the Libor model's thornier obstacles.
The Sabr Libor Market Model
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Author : Riccardo Rebonato
language : en
Publisher: Wiley
Release Date : 2010-04-01
The Sabr Libor Market Model written by Riccardo Rebonato and has been published by Wiley this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-04-01 with Business & Economics categories.
This book presents a major innovation in the interest rate space. It explains a financially motivated extension of the LIBOR Market model which accurately reproduces the prices for plain vanilla hedging instruments (swaptions and caplets) of all strikes and maturities produced by the SABR model. The authors show how to accurately recover the whole of the SABR smile surface using their extension of the LIBOR market model. This is not just a new model, this is a new way of option pricing that takes into account the need to calibrate as accurately as possible to the plain vanilla reference hedging instruments and the need to obtain prices and hedges in reasonable time whilst reproducing a realistic future evolution of the smile surface. It removes the hard choice between accuracy and time because the framework that the authors provide reproduces today's market prices of plain vanilla options almost exactly and simultaneously gives a reasonable future evolution for the smile surface. The authors take the SABR model as the starting point for their extension of the LMM because it is a good model for European options. The problem, however with SABR is that it treats each European option in isolation and the processes for the various underlyings (forward and swap rates) do not talk to each other so it isn't obvious how to relate these processes into the dynamics of the whole yield curve. With this new model, the authors bring the dynamics of the various forward rates and stochastic volatilities under a single umbrella. To ensure the absence of arbitrage they derive drift adjustments to be applied to both the forward rates and their volatilities. When this is completed, complex derivatives that depend on the joint realisation of all relevant forward rates can now be priced. Contents THE THEORETICAL SET-UP The Libor Market model The SABR Model The LMM-SABR Model IMPLEMENTATION AND CALIBRATION Calibrating the LMM-SABR model to Market Caplet prices Calibrating the LMM/SABR model to Market Swaption Prices Calibrating the Correlation Structure EMPIRICAL EVIDENCE The Empirical problem Estimating the volatility of the forward rates Estimating the correlation structure Estimating the volatility of the volatility HEDGING Hedging the Volatility Structure Hedging the Correlation Structure Hedging in conditions of market stress
Financial Derivatives In Theory And Practice
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Author : P. J. Hunt
language : en
Publisher:
Release Date : 2000-05-31
Financial Derivatives In Theory And Practice written by P. J. Hunt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-05-31 with Business & Economics categories.
This text primarily discusses the pricing and hedging of derivatives and the determination of risks associated with writing options. Part 4 includes a compendium of examples, many providing solutions to problems set earlier in the text.
The Libor Market Model In Practice
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Author : Dariusz Gatarek
language : en
Publisher: John Wiley & Sons
Release Date : 2007-01-30
The Libor Market Model In Practice written by Dariusz Gatarek and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-01-30 with Business & Economics categories.
The LIBOR Market Model (LMM) is the first model of interest rates dynamics consistent with the market practice of pricing interest rate derivatives and therefore it is widely used by financial institution for valuation of interest rate derivatives. This book provides a full practitioner's approach to the LIBOR Market Model. It adopts the specific language of a quantitative analyst to the largest possible level and is one of first books on the subject written entirely by quants. The book is divided into three parts - theory, calibration and simulation. New and important issues are covered, such as various drift approximations, various parametric and nonparametric calibrations, and the uncertain volatility approach to smile modelling; a version of the HJM model based on market observables and the duality between BGM and HJM models. Co-authored by Dariusz Gatarek, the 'G' in the BGM model who is internationally known for his work on LIBOR market models, this book offers an essential perspective on the global benchmark for short-term interest rates.
Stochastic Interest Rate Modeling With Fixed Income Derivative Pricing Third Edition
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Author : Nicolas Privault
language : en
Publisher: World Scientific
Release Date : 2021-09-02
Stochastic Interest Rate Modeling With Fixed Income Derivative Pricing Third Edition written by Nicolas Privault and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-09-02 with Mathematics categories.
This book introduces the mathematics of stochastic interest rate modeling and the pricing of related derivatives, based on a step-by-step presentation of concepts with a focus on explicit calculations. The types of interest rates considered range from short rates to forward rates such as LIBOR and swap rates, which are presented in the HJM and BGM frameworks. The pricing and hedging of interest rate and fixed income derivatives such as bond options, caps, and swaptions, are treated using forward measure techniques. An introduction to default bond pricing and an outlook on model calibration are also included as additional topics.This third edition represents a significant update on the second edition published by World Scientific in 2012. Most chapters have been reorganized and largely rewritten with additional details and supplementary solved exercises. New graphs and simulations based on market data have been included, together with the corresponding R codes.This new edition also contains 75 exercises and 4 problems with detailed solutions, making it suitable for advanced undergraduate and graduate level students.
Interest Rate Derivatives Explained Volume 2
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Author : Jörg Kienitz
language : en
Publisher: Springer
Release Date : 2017-11-08
Interest Rate Derivatives Explained Volume 2 written by Jörg Kienitz and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-08 with Business & Economics categories.
This book on Interest Rate Derivatives has three parts. The first part is on financial products and extends the range of products considered in Interest Rate Derivatives Explained I. In particular we consider callable products such as Bermudan swaptions or exotic derivatives. The second part is on volatility modelling. The Heston and the SABR model are reviewed and analyzed in detail. Both models are widely applied in practice. Such models are necessary to account for the volatility skew/smile and form the fundament for pricing and risk management of complex interest rate structures such as Constant Maturity Swap options. Term structure models are introduced in the third part. We consider three main classes namely short rate models, instantaneous forward rate models and market models. For each class we review one representative which is heavily used in practice. We have chosen the Hull-White, the Cheyette and the Libor Market model. For all the models we consider the extensions by a stochastic basis and stochastic volatility component. Finally, we round up the exposition by giving an overview of the numerical methods that are relevant for successfully implementing the models considered in the book.
Interest Rate Models Theory And Practice
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Author : Damiano Brigo
language : en
Publisher: Springer Science & Business Media
Release Date : 2007-09-26
Interest Rate Models Theory And Practice written by Damiano Brigo and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-09-26 with Mathematics categories.
The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into a new chapter. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach. Examples of calibrations to real market data are now considered. The fast-growing interest for hybrid products has led to a new chapter. A special focus here is devoted to the pricing of inflation-linked derivatives. The three final new chapters of this second edition are devoted to credit. Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives -- mostly Credit Default Swaps (CDS), CDS Options and Constant Maturity CDS - are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market. Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments.