The Interest Rate Market Model

Yi Tang and Bin Li
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Yi Tang: Goldman, Sachs & Co., Inc., USA
Bin Li: Westport Financial, LLC, USA

Chapter 7 in Quantitative Analysis, Derivatives Modeling, and Trading Strategies:In the Presence of Counterparty Credit Risk for the Fixed-Income Market, 2007, pp 249-326 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:BGM Model versus HJM ModelThe Brace-Gatarek-Musiela Original ApproachComparison Between HJM and BGM ModelsJamshidian's ApproachMartingale ApproachThe LIBOR Market Model and the Black Formula for Caps/FloorsThe Swap Market Model and the Black Formula for European SwaptionsOverview of Simultaneous and Globally Consistent Pricing and HedgingSimultaneous Consistent Pricing Through ApproximationMore on Simultaneous Consistent PricingMore on the Martingale or Full-dimensional LIBOR Market ModelModeling Interest Rate Volatility Skew and SmileCEV and LCEV Models for Modeling the Volatility SkewExamples of Volatility Skew for Caplets and SwaptionsThe Nonexploding Bushy Tree TechniqueConstruction of a Nonexploding Bushy TreeModeling Stochastic Processes on a Nonexploding Bushy TreeApplication of Martingale Control Variate TechniqueNumerical ResultsGeneral Framework for Multi-factor Modeling for Hybrid MarketStochastic Volatility BGM ModelsExamples of Stochastic Volatility BGM Model ResultsAppendixMore Numerical Results Obtained With the NBT TechniqueSufficient Conditions for ConvergenceApplication of Girsanov's Change of Measure Theorem to Derivation of the Martingale or Full-dimensional LIBOR Market Model

Keywords: CVA; Credit Valuation Adjustment; Counterparty Credit; BGM Model; HJM Model; RS Model; Martingale; Derivatives Modeling; Martingale Resampling; Orthogonal Exponential Spline; Stat Arb; Nonexploding Bushy Tree; NBT; PRDC; TARN; Snowball; Snowbear; CCDS; Credit Extinguisher (search for similar items in EconPapers)
Date: 2007
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