Cases of Calibration of the LIBOR Market Model

  • Damiano Brigo
  • Fabio Mercurio
Part of the Springer Finance book series (FINANCE)

Abstract

In this chapter we present some numerical examples concerning the goodness of fit of the LFM to both the caps and swaptions markets, based on market data. We study several cases based on different instantaneous-volatility parameterizations. We will also point out a particular parameterization allowing for a closed-form-formulas calibration to swaption volatilities and establishing a one to one correspondence between swaption volatilities and LFM covariance parameters.

Keywords

Covariance Lution Volatility Stake Cali 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Damiano Brigo
    • 1
  • Fabio Mercurio
    • 1
  1. 1.Banca IMISan Paolo IMI GroupMilanItaly

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