Cases of Calibration of the LIBOR Market Model
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.
KeywordsTerm Structure Forward Rate Calibration Result Market Volatility Volatility Formulation
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