Product 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 impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on 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 in 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 treatment of the recently developed uncertain-volatility approach. Examples of calibrations to real market data are now considered. The fast-growing interest for hybrid products has led to a new chapter. A special focus here is devoted to the pricing of convertible bonds and inflation-linked derivatives. Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives - mostly Credit Default Swaps (CDS) and CDS Options - are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market.

Product Details

• Amazon Sales Rank: #926615 in Books
• Published on: 2001-06
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 518 pages

Customer Reviews

Good book if you've got past Baxter and Rennie
This is a good overview of some of the more complex interest rate models, however it does assume familiatrity with the fundamental theorem of finance and hence why martingales are important. It assumes the reader knows all about filtration, probability spaces and changes of measure (Radon Nikodym derivatives and the change of measure theorem). If you are not already familiar with all this then the book will not be helpful to you - read something more basic like Financial Calculus (Baxter and Rennie).

Aside to the technical content, I find many of the quotes at the beginning of each chapter (usually from DC comics) pointless and sometimes irritating.

A must for quant
Good reference for the available interest rate model, especially for the pricing of some complex interest rate derivatives. A must for IRD Quants.