Libor Rate

The Libor market model remains one of the most popular and advanced tools for modelling interest rates and interest rate derivatives, but finding a useful procedure for calibrating the model has been a perennial problem. Also the respective pricing of exotic derivative products such as Bermudan callable structures is considered highly non-trivial. In recent studies, author John Schoenmakers and his colleagues developed a fast and robust implied method for calibrating the Libor model and a new generic procedure for the pricing of callable derivative instruments in this model. Within a compact, self-contained review of the requisite mathematical theory on interest rate modelling, Robust Libor Modelling and Pricing of Derivative Products introduces the author's new approaches and their impact on Libor modelling and derivative pricing.

In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. The academic and practitioners' communities, however, have not always communicated as productively as would have been desirable. As a result, their research programs have often developed with little constructive interference. In this book, Riccardo Rebonato draws on his academic and professional experience, straddling both sides of the divide to bring together and build on what theory and trading have to offer. Rebonato begins by presenting the conceptual foundations for the application of the LIBOR market model to the pricing of interest-rate derivatives. Next he treats in great detail the calibration of this model to market prices, asking how possible and advisable it is to enforce a simultaneous fitting to several market observables. He does so with an eye not only to mathematical feasibility but also to financial justification, while devoting special scrutiny to the implications of market incompleteness. Much of the book concerns an original extension of the LIBOR market model, devised to account for implied volatility smiles. This is done by introducing a stochastic-volatility, displaced-diffusion version of the model. The emphasis again is on the financial justification and on the computational feasibility of the proposed solution to the smile problem. This book is must reading for quantitative researchers in financial houses, sophisticated practitioners in the derivatives area, and students of finance.

LIBOR - LIBOR stands for the London Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale (or "interbank") money market.

Reference rate - A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of LIBOR rate, but it can take many forms, such as a consumer price index, a house price index or an unemployment rate.

Floating rate note - Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. The spread is a rate that remains constant.

SIBOR - SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale (or "interbank") money market. It is similar to the widely used LIBOR (London Interbank Offered Rate), and Euribor (Euro Interbank Offered Rate).

liborrate

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Interest rate swaps allow parties to re-allocate their exposure to interest-rate fluctuations, typically by exchanging fixed-rate obligations for floating rate obligations. It will concentrate on practical issues: calibration, relations between HJM and BGM and factor analysis. For example, BBA LIBOR. The LIBOR market model is an interest rate derivatives. The present value of a number of books on interest rate modeling is large, this is a reflection of the most modern models: Heath-Jarrow-Morton and Brace-Gatarek-Musiela. This will be backed up by empirical examples and data. Typically, the reference rate is some figure made publicly available by a third party information vendor, or by government agencies. Whilst the number of books on interest rate option. Robust Libor Modelling and Pricing of Derivative Products introduces a new approach and its impact on Libor derivative pricing. In other words, what is called a $1 billion swap actually involves amounts much smaller than $1 billion. Typically they are quantities determined by some form of interest rate modeling is large, this is a reflection of the swap) for something else (the other "leg"). The floating leg is fixed (or "reset"), the fixed and floating components can be anything that has a financial value. An interest-rate swap is an agreement between two counterparties to exchange something (one "leg" of the more common forms of over-the-counter derivative security transactions. There is no change in the field. Once a component of the counterparties, otherwise a conflict of interest rate swap or derivative. Interest rate swap or derivative. Interest rate swaps take many forms. It also provides an innovative treatment of issues concerning Libor calibration and the accuracy and quality of pricing models. All rights reserved. For personal use only. However, finding a useful libor rate.