Different Covariance Parameterizations of the Libor Market Model and Joint Caps/Swaptions Calibration
نویسندگان
چکیده
In this paper we consider several parametric assumptions for the instantaneous covariance structure of the Libor market model. We examine the impact of each different parameterization on the evolution of the term structure of volatilities in time, on terminal correlations and on the joint calibration to the caps and swaptions markets. We present a number of cases of calibration in the Euro market. In particular, we consider calibration via a parameterization establishing a controllable one to one correspondence between instantaneous covariance parameters and swaptions volatilities, and assess the benefits of smoothing the input swaption matrix before calibrating. D. Brigo, F. Mercurio, M. Morini: Joint Calibration of the Libor model 3
منابع مشابه
On the joint calibration of the Libor market model to caps and swaptions market volatilities
In this paper we consider several parametric assumptions for the instantaneous covariance structure of the Libor market model. We examine the impact of each different parameterization on the evolution of the term structure of volatilities in time, on terminal correlations and on the joint calibration to the caps and swaptions markets. We present a number of cases of calibration in the Euro mark...
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