Calibration and Parameterization Methods for the Libor Market Model

1. Front Matter

   Pages I-IX

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2. Introduction

   • Christoph Hackl

   Pages 1-3

3. Foundations of Mathematical Finance and Stochastic Calculus

   • Christoph Hackl

   Pages 5-20

4. The Libor Market Model

   • Christoph Hackl

   Pages 21-29

5. Volatility and Correlation in the Libor Market Model

   • Christoph Hackl

   Pages 31-37

6. Applications and Results

   • Christoph Hackl

   Pages 39-53

7. Conclusion

   • Christoph Hackl

   Pages 55-56

8. Back Matter

   Pages 57-64

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The Libor Market Model (LMM) is a mathematical model for pricing and risk management of interest rate derivatives and has been built on the framework of modelling forward rates. For the conceptual understanding of the model a strong background in the fields of mathematics, statistics, finance and especially for implementation, computer science is necessary. The book provides the ne cessary groundwork to understand the LMM and delivers a framework to implement a working model where possible calibration and parameterization methods for volatility and correlation are explained. Special emphasis lies also on the trade off of speed and correctness where differences in choosing random number generators and the advantages of factor reduction are shown.

• Forward Rate Model
• Interest rate derivatives pricing
• Libor Market Model
• Quasi and pseudo random numbers
• Term Structure Model

• University of Applied Sciences of bfi Wien, Wien, Austria

  Christoph Hackl

Christoph Hackl, MA obtained his master’s degree at the UAS bfi Vienna in the programme „Quantitative Asset and Risk Management“.

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