The LIBOR Market Model in Practice (Google eBook)

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John Wiley & Sons, Jan 30, 2007 - Business & Economics - 290 pages
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The LIBOR Market Model (LMM) is the first model of interest rates dynamics consistent with the market practice of pricing interest rate derivatives and therefore it is widely used by financial institution for valuation of interest rate derivatives.

This book provides a full practitioner’s approach to the LIBOR Market Model. It adopts the specific language of a quantitative analyst to the largest possible level and is one of first books on the subject written entirely by quants. The book is divided into three parts – theory, calibration and simulation. New and important issues are covered, such as various drift approximations, various parametric and nonparametric calibrations, and the uncertain volatility approach to smile modelling; a version of the HJM model based on market observables and the duality between BGM and HJM models. Co-authored by Dariusz Gatarek, the ‘G’ in the BGM model who is internationally known for his work on LIBOR market models, this book offers an essential perspective on the global benchmark for short-term interest rates.

  

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Contents

Part I THEORY
1
Part II CALIBRATION
63
Part III SIMULATION
167

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About the author (2007)

PRZEMYSLAW BACHERT is a senior financial engineer in theGlobal Financial Services Risk Management Group at Ernst and Young.He holds his Ph.D. in economics from the University of Lodz. In hiswork Przemyslaw is responsible for structure derivatives valuationand implementation of risk management systems. He has spent thelast six years working with financial institutions in the Europeand Middle East to enhance their risk management capabilitiesincluding Algorithmics parameterization. Prior to joining Ernst andYoung, Przemyslaw was a financial analyst at Bank Handlowy inWarsaw (Citigroup) where he was responsible for quantitativemaintenance of front office system Kondor+. He is also a teacher inthe Ernst and Young Academy of Business for the FinancialEngineering course which covers the LIBOR Market Model.

DARIUSZ GATAREK is Credit Risk Analyst at Glencore UKLtd. In addition he is a professor at the WSB-National LouisUniversity and the Polish Academy of Sciences. He joined GlencoreUK Ltd from NumeriX LLC, where he was Director of Researchspecializing in interest rate derivatives pricing. Before he wasinvolved in valuing derivatives and designing risk managementsystems for capital adequacy within the consultancy Deloitte andTouche and several banks. Dariusz has published a number of paperson financial models of which perhaps his work with Alan Brace andMarek Musiela on Brace-Gatarek-Musiela (BGM) models of interestrates dynamics is the most well-known. He is a frequent speaker atconferences worldwide.

ROBERT MAKSYMIUK is a senior financial engineer in theGlobal Financial Services Risk Management Group at Ernst and Youngwhere he is responsible for structured derivatives pricing andimplementation of risk management systems for the clients. Asconsultant he has worked for several financial institutions in theEurope and Middle – East and his activity coveredimplementation Algo Suite risk management system. Prior to joiningErnst and Young Robert work in BRE Bank where he worked togetherwith Dariusz Gatarek and he was engaged in quantitative research.Additionaly Robert is a teacher in the Ernst and Young Academy ofBusiness for the Financial Engineering course which covers theLIBOR Market Model.

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