Systematic generation of parametric correlation structures for the LIBOR market model

International Journal of Theoretical and Applied Finance

Volumn 6, Issue 5, 2003, Pages 507-519

  Schoenmakers, John ^a,b   Coffey, Brian ^c  

^a WEIERSTRASS INSTITUTE FOR APPLIED ANALYSIS AND STOCHASTICS   (Germany)

^b DELFT UNIVERSITY OF TECHNOLOGY   (Netherlands)

^c MERRILL LYNCH   (United Kingdom)

Author keywords

Calibration; Correlation structures; LIBOR models

Indexed keywords

EID: 0142023232     PISSN: 02190249     EISSN: None     Source Type: Journal    
DOI: 10.1142/S0219024903002055     Document Type: Article

References (15)

1. A. Brace, D. Gatarek and M. Musiela, The market model of interest rate dynamics, Mathematical Finance 7(2) (1997) 127-155.
2. D. Brigo and F. Mercurio, Joint calibration of the LIBOR market model to caps and swaptions volatilities, working paper (2001).
3. R. N. Curnow and C. W. Dunnett, The numerical evaluation of certain multivariate normal integrals, Ann. Math. Statist. 33 (1962) 571-579.
4. M. Fisher, D. Nychka and D. Zervos, Fitting the term structure of interest rates with smoothing splines, Finance and Economics Discussion Series, Federal Reserve Board, Washington, D.C. (1995).
5. D. Heath, R. Jarrow and A. Morton, Bond pricing and the term structure of interest rates: A new methodology for contingent claim valuation, Econometrica 60(1) (1992) 77-105.
6. J. Hull and A. White, Forward rate volatilities, swap rate volatilities, and the implementation of the LIBOR market model, Journal of Fixed Income 10(2) (1992) 46-62.
7. P. Jäckel and R. Rebonato, Linking caplet and swaption volatilities in a BGM/J Framework: Approximate solutions, working paper (2000), to appear in Journal of Computational Finance.
8. F. Jamshidan, LIBOR and swap market models and measures, Finance and Stochastics 1 (1997) 293-330.
9. O. Kurbanmuradov, K. Sabelfeld and J. Schoenmakers, Lognormal approximations to LIBOR market models, Journal of Computational Finance 6(1) (2002) 69-100.
10. O. Linton, E. Mammen, J. Nielsen and C. Tanggaard, Estimating yield curves by kernel smoothing methods, Journal of Econometrics 105(1) (2001) 185-223.
11. R. Rebonato, Interest-rate Option Models (John Wiley & Sons, 1996).
12. R. Rebonato, Volatility and Correlation (John Wiley & Sons, 1999).
13. R. Rebonato, On the simultaneous calibration of multifactor lognormal interest rate models to Black volatilities and to the correlation matrix, Journal of Computational Finance 2(4) (1999) 5-27.
14. J. G. M. Schoenmakers, Calibration of LIBOR models to caps and swaptions: A way around intrinsic instabilities via parsimonious structures and a collateral market criterion, preprint no. 740, Weierstrass Institute Berlin (2002).
15. J. G. M. Schoenmakers and B. Coffey, LIBOR rate models, related derivatives and model calibration, Conference paper, QMF 98 Sydney (1998), preprint no. 480, Weierstrass Institute Berlin (1999).