Calibration

Ingo Beyna
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Ingo Beyna: Centre for Practical Quantitative Finance

Chapter Chapter 4 in Interest Rate Derivatives, 2013, pp 27-46 from Springer

Abstract: Abstract The calibration of a term structure model is a necessary as well as challenging step to use the model in practise. The calibration problem results as a high-dimensional, non-linear, global minimization problem and we analyze the characteristics of the minimization surface in a one-factor model first. Second, we discuss some optimization techniques and their suitability in the case of Cheyette models. Further, we present criteria to measure the quality of calibration results. We finish this topic by demonstrating the results of the calibration of the Three Factor Exponential Model.

Keywords: Implied Volatility; Price Formula; Simulated Annealing Method; Calibration Problem; Annealing Schedule (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-34925-6_4

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DOI: 10.1007/978-3-642-34925-6_4

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