Interest Rate Derivatives

Valuation, Calibration and Sensitivity Analysis

  • Ingo Beyna

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 666)

Table of contents

  1. Front Matter
    Pages i-xviii
  2. Ingo Beyna
    Pages 1-1
  3. Ingo Beyna
    Pages 3-15
  4. Ingo Beyna
    Pages 17-26
  5. Ingo Beyna
    Pages 27-46
  6. Ingo Beyna
    Pages 47-71
  7. Ingo Beyna
    Pages 73-100
  8. Ingo Beyna
    Pages 101-130
  9. Ingo Beyna
    Pages 137-157
  10. Ingo Beyna
    Pages 159-161
  11. Back Matter
    Pages 163-209

About this book

Introduction

The class of interest rate models introduced by O. Cheyette in 1994 is a subclass of the general HJM framework with a time dependent volatility parameterization. This book addresses the above mentioned class of interest rate models and concentrates on the calibration, valuation and sensitivity analysis in multifactor models. It derives analytical pricing formulas for bonds and caplets and applies several numerical valuation techniques in the class of Cheyette model, i.e. Monte Carlo simulation, characteristic functions and PDE valuation based on sparse grids. Finally it focuses on the sensitivity analysis of Cheyette models and derives Model- and Market Greeks. To the best of our knowledge, this sensitivity analysis of interest rate derivatives in the class of Cheyette models is unique in the literature. Up to now the valuation of interest rate derivatives using PDEs has been restricted to 3 dimensions only, since the computational effort was too great. The author picks up the sparse grid technique, adjusts it slightly and can solve high-dimensional PDEs (four dimensions plus time) accurately in reasonable time.
Many topics investigated in this book  are new areas of research and make a significant contribution to the scientific community of financial engineers. They also represent a valuable development for practitioners.​

Keywords

91G30, 91G60 Cheyette model interest rate derivatives multifactor HJM model numerical methods valuation

Authors and affiliations

  • Ingo Beyna
    • 1
  1. 1.of Finance & ManagementFrankfurt SchoolFrankfurtGermany

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-642-34925-6
  • Copyright Information Springer-Verlag Berlin Heidelberg 2013
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Mathematics and Statistics
  • Print ISBN 978-3-642-34924-9
  • Online ISBN 978-3-642-34925-6
  • Series Print ISSN 0075-8442
  • About this book
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