By Riccardo Rebonato

In contemporary years, interest-rate modeling has built quickly when it comes to either perform and concept. the tutorial and practitioners' groups, despite the fact that, haven't continually communicated as productively as might were fascinating. accordingly, their study courses have frequently constructed with little positive interference. during this e-book, Riccardo Rebonato attracts on his educational event, straddling either side of the divide to compile and construct on what concept and buying and selling need to offer.

Rebonato starts off through proposing the conceptual foundations for the appliance of the LIBOR industry version to the pricing of interest-rate derivatives. subsequent he treats in nice element the calibration of this version to industry costs, asking how attainable and really useful it truly is to implement a simultaneous becoming to numerous marketplace observables. He does so with a watch not just to mathematical feasibility but in addition to monetary justification, whereas devoting distinct scrutiny to the consequences of industry incompleteness.

Much of the publication matters an unique extension of the LIBOR industry version, devised to account for implied volatility smiles. this can be performed by way of introducing a stochastic-volatility, displaced-diffusion model of the version. The emphasis back is at the monetary justification and at the computational feasibility of the proposed way to the smile challenge. This publication is needs to examining for quantitative researchers in monetary homes, refined practitioners within the derivatives zone, and scholars of finance.

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Modern Pricing of Interest-Rate Derivatives: The LIBOR Market Model and Beyond by Riccardo Rebonato

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