## Efficient Methods for Valuing Interest Rate DerivativesEfficient Methods for Valuing Interest Rate Derivatives provides an overview of the models that can be used for valuing and managing interest rate derivatives. Split into two parts, the first discusses and compares the traditional models, such as spot- and forward-rate models, while the second concentrates on the more recently developed Market models. Unlike most of his competitors, the author's focus is not only on the mathematics: Antoon Pelsser draws on his experience in industry to explore the practical issues, such as the implementation of models, and model selection.Aimed at people with a solid quantitative background, this book will be of particular interest to risk managers, interest rate derivative traders, quantitative researchers, portfolio and fund managers, and students of mathematics and economics, but it will also prove invaluable to anyone looking for a good overview of interest rate derivative modelling. |

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### Contents

II | 5 |

III | 6 |

V | 8 |

VI | 10 |

VII | 11 |

VIII | 12 |

IX | 14 |

X | 16 |

LXXII | 89 |

LXXIII | 90 |

LXXIV | 91 |

LXXV | 92 |

LXXVI | 93 |

LXXVII | 95 |

LXXVIII | 96 |

LXXIX | 97 |

XII | 17 |

XIII | 18 |

XV | 20 |

XVI | 21 |

XVII | 23 |

XX | 24 |

XXI | 25 |

XXII | 26 |

XXIII | 27 |

XXV | 28 |

XXVI | 29 |

XXVII | 30 |

XXIX | 31 |

XXX | 32 |

XXXI | 34 |

XXXII | 36 |

XXXIII | 37 |

XXXV | 38 |

XXXVI | 40 |

XXXVII | 45 |

XXXVIII | 46 |

XXXIX | 47 |

XLI | 48 |

XLII | 49 |

XLIII | 50 |

XLIV | 51 |

XLV | 52 |

XLVII | 53 |

XLIX | 55 |

L | 57 |

LI | 59 |

LII | 60 |

LIV | 61 |

LV | 62 |

LVI | 63 |

LVII | 64 |

LIX | 66 |

LXI | 69 |

LXII | 71 |

LXIII | 72 |

LXIV | 74 |

LXV | 77 |

LXVII | 84 |

LXVIII | 85 |

LXIX | 87 |

LXX | 88 |

LXXX | 98 |

LXXXI | 99 |

LXXXII | 100 |

LXXXIII | 102 |

LXXXIV | 103 |

LXXXVI | 104 |

LXXXVIII | 105 |

LXXXIX | 106 |

XC | 109 |

XCI | 110 |

XCII | 111 |

XCIII | 114 |

XCIV | 115 |

XCVI | 117 |

XCVII | 118 |

XCVIII | 120 |

C | 121 |

CIII | 123 |

CIV | 124 |

CV | 125 |

CX | 127 |

CXII | 128 |

CXIII | 131 |

CXIV | 132 |

CXVII | 134 |

CXVIII | 135 |

CXX | 136 |

CXXI | 139 |

CXXII | 140 |

CXXIV | 142 |

CXXV | 145 |

CXXVI | 146 |

CXXVII | 147 |

CXXX | 149 |

CXXXI | 150 |

CXXXIII | 151 |

CXXXV | 153 |

CXXXVII | 154 |

CXXXVIII | 155 |

CXXXIX | 156 |

CXL | 159 |

CXLII | 160 |

CXLIII | 161 |

163 | |

167 | |

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### Common terms and phrases

algorithm analytical formulae arbitrage opportunities assumption Black formula boundary condition Brownian motion calculate prices cap and floor caplet Change of Numeraire Chapter convexity correction correlation currency denotes derivative securities determined discount bond discount bond prices discrete barrier DJDP economy equivalent martingale measure expression follows forward LIBOR rates forward rate forward swap rates functional form fundamental solutions Girsanov's Theorem given Hence Ho-Lee model Hull and White Hull-White model implementation initial term-structure interest rate derivatives Ito's Lemma LIBOR market model market prices marketed assets maturity mean-reversion parameter measure Q MF model money-market account Monte Carlo simulation multi-factor model normal distribution Numeraire Theorem obtain one-factor partial differential equation payment payoff prices of interest probability distribution probability measure PVBP Section solve spot interest rate spread option squared Gaussian model stochastic differential equation stochastic process swap market model swap rates swaptions T-forward-risk-adjusted measure term-structure of interest underlying variance