Interest Rate Models - Theory and Practice: With Smile, - download pdf or read online

By Damiano Brigo

ISBN-10: 3540221492

ISBN-13: 9783540221494

ISBN-10: 3540417729

ISBN-13: 9783540417729

The second variation of this sucessful ebook has numerous new positive factors. The calibration dialogue of the elemental LIBOR marketplace version has been enriched significantly, with an research of the impression of the swaptions interpolation procedure and of the exogenous immediate correlation at the calibration outputs. A dialogue of historic estimation of the on the spot correlation matrix and of rank aid has been further, and a LIBOR-model constant swaption-volatility interpolation process has been introduced.

The previous sections dedicated to the smile factor within the LIBOR marketplace version were enlarged right into a new bankruptcy. New sections on local-volatility dynamics, and on stochastic volatility versions were additional, with an intensive therapy of the lately built uncertain-volatility technique. Examples of calibrations to genuine marketplace facts at the moment are considered.

The fast-growing curiosity for hybrid items has resulted in a brand new bankruptcy. a distinct concentration here's dedicated to the pricing of convertible bonds and inflation-linked derivatives.

Since credits Derivatives are more and more basic, and because within the reduced-form modeling framework a lot of the strategy concerned is comparable to interest-rate modeling, credits Derivatives -- in most cases credits Default Swaps (CDS) and CDS techniques - are mentioned, development at the simple brief rate-models and industry types brought past for the default-free market.

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Additional resources for Interest Rate Models - Theory and Practice: With Smile, Inflation and Credit

Example text

3 The Two-Models Dynamics under a Unique Convenient Forward Measure . . . . . . . . . . . . . . 2 Quanto Constant-Maturity Swaps . . . . . . . . . . . . 1 Quanto CMS: The Contract . . . . . . . . . . . . 2 Quanto CMS: The G2++ Model . . . . . . . . . . 3 Quanto CMS: Quanto Adjustment . . . . . . . . . 3 Differential Swaps . . . . . . . . . . . . . . . . . . . 1 The Contract . . . . . . . . . . . .

3 The Cox, Ingersoll and Ross (CIR) Model . . . . . . 4 Affine Term-Structure Models . . . . . . . . . . . 5 The Exponential-Vasicek (EV) Model . . . . . . . . 3 The Hull-White Extended Vasicek Model . . . . . . . . . 1 The Short-Rate Dynamics . . . . . . . . . . . . . 2 Bond and Option Pricing . . . . . . . . . . . . . 3 The Construction of a Trinomial Tree . . . . . . . . 4 Possible Extensions of the CIR Model . .

967 Part I BASIC DEFINITIONS AND NO ARBITRAGE 1. ” Steven Weinberg, Nobel Prize in Physics 1979 “What?!? Politics?!? Culture?!? ” (Refashioned after “sono solo canzonette”, Edoardo Bennato, 1980) In this first chapter we present the main definitions that will be used throughout the book.

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Interest Rate Models - Theory and Practice: With Smile, Inflation and Credit by Damiano Brigo


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