Models of Forward LIBOR and Swap Rates
نویسنده
چکیده
The backward induction approach is systematically used to produce various models of forward market rates. These include the lognormal model of forward LIBOR rates examined in Miltersen et al. (1997) and Brace et al. (1997), as well as the lognormal model of ((xed-maturity) forward swap rates proposed by Jamshidian (1996, 1997). The valuation formulae for European caps and swaptions are given. In the last section, the Eurodollar futures contracts and options are examined within the framework of the lognormal model of forward LIBOR rates.
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