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Interest Rate Models – Theory and Practice: With Smile, Inflation and Credit (Springer Finance)

Amazon.com Price:  $66.27 (as of 12/05/2019 19:36 PST- Details)

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Description

The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the affect of the swaptions interpolation technique and of the exogenous instantaneous correlation at the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced.

 

The old sections devoted to the smile issue within the LIBOR market model have been enlarged into a new chapter. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough remedy of the recently developed uncertain-volatility approach.

Examples of calibrations to real market data at the moment are thought to be.

 

The fast-growing interest for hybrid products has led to a new chapter. A special center of attention here is devoted to the pricing of inflation-linked derivatives.

 

The three final new chapters of this second edition are devoted to credit.

Since Credit Derivatives are more and more fundamental, and since within the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives — mostly Credit Default Swaps (CDS), CDS Options and Constant Maturity CDS – are discussed, building at the basic short rate-models and market models introduced earlier for the default-free market. Counterparty risk in interest rate payoff valuation may be thought to be, motivated by the up to date Basel II framework developments.

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