Basic Definitions and No Arbitrage -- Definitions and Notation -- No-Arbitrage Pricing and Numeraire Change -- From Short Rate Models to HJM -- One-factor short-rate models -- Two-Factor Short-Rate Models -- The Heath-Jarrow-Morton (HJM) Framework -- Market Models -- The LIBOR and Swap Market Models (LFM and LSM) -- Cases of Calibration of the LIBOR Market Model -- Monte Carlo Tests for LFM Analytical Approximations -- The Volatility Smile -- Including the Smile in the LFM -- Local-Volatility Models -- Stochastic-Volatility Models -- Uncertain-Parameter Models -- Examples of Market Payoffs -- Pricing Derivatives on a Single Interest-Rate Curve -- Pricing Derivatives on Two Interest-Rate Curves -- Inflation -- Pricing of Inflation-Indexed Derivatives -- Inflation-Indexed Swaps -- Inflation-Indexed Caplets/Floorlets -- Calibration to market data -- Introducing Stochastic Volatility -- Pricing Hybrids with an Inflation Component -- Credit -- and Pricing under Counterparty Risk -- Intensity Models -- CDS Options Market Models
Summary
Contains a calibration discussion of the basic LIBOR market model, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. This work also includes a discussion of historical estimation of the instantaneous correlation matrix and of rank reduction
Bibliography
Includes bibliographical references (pages 951-966) and index
