The LIBOR model dynamics: Approximations, calibration and diagnostics [An article from: European Journal of Operational Research] | ![The LIBOR model dynamics: Approximations, calibration and diagnostics [An article from: European Journal of Operational Research]](http://ecx.images-amazon.com/images/I/51G4P0G7AGL._SL160_.jpg)
 enlarge | Authors: D. Brigo, F. Mercurio, M. Morini
Publisher: Elsevier
Category: Book
Buy New: $7.95
Sales Rank: 4416195
Format: Html
Media: Digital
Publication Date: May 16, 2005
Availability: Available for download now
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Product Description
This digital document is a journal article from European Journal of Operational Research, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
In this paper we consider several parametric assumptions for the instantaneous covariance structure of the LIBOR market model, whose role in the modern interest-rate derivatives theory is becoming more and more central. We examine the impact of each different parameterization on the evolution of the term structure of volatilities in time, on terminal correlations and on the joint calibration to the caps and swaptions markets. We present a number of cases of calibration in the Euro market. In particular, we consider calibration via a parameterization establishing a controllable one to one correspondence between instantaneous covariance parameters and swaptions volatilities, and assess the benefits of smoothing the input swaption matrix before calibrating.
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