Simona Svoboda-Greenwood

LIBOR Market Model

Volatility Specifications

• Broschiertes Buch

Produktbeschreibung

The LMM is an effective framework for the pricing of
interest rate derivatives, not least because it
models observable market quantities.

There exist three main techniques for incorporating
a volatility smile/skew in any modelling framework:
allowing a local volatility function, stochastic
volatility and jump dynamics. Here various ways to
incorporate smile/skew are studied, loosely based on
the above three approaches.

Both the CEV and displaced-diffusion processes give
rise to an implied volatility skew. The two
processes produce closely matching prices for
European call options over a variety of strikes and
maturities. Here, this similarity in prices is
analytically quantified using asymptotic expansion
techniques.

A regime shifting model may be viewed as a reduced
form of a full stochastic volatility model. A two
state, continuous time Markov Chain model,
characterised by a time dependent volatility in each
state is implemented.

Finally, the Levy LIBOR model is considered as a
generalisation of jump processes.

Produktdetails

• Verlag: VDM Verlag Dr. Müller
• Seitenzahl: 188
• Englisch
• Gewicht: 255g
• ISBN-13: 9783639170610
• ISBN-10: 363917061X
• Artikelnr.: 26592700

Autorenporträt

Simona has worked in the finacial services industry for a number
of years and holds a PhD in Mathematical Finance from the
University of Oxford.