Models of forward Libor and swap rates
AbstractThe backward induction approach is systematically used to produce various models of forward market rates. These include the lognormal model of forward Libor rates examined by Miltersen et al. and Brace et al., as well as the lognormal model of (fixed-maturity) forward swap rates, which was proposed by Jamshidian. 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 6 (1999)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=100141
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marek Rutkowski & Marek Musiela, 1997. "Continuous-time term structure models: Forward measure approach (*)," Finance and Stochastics, Springer, vol. 1(4), pages 261-291.
- J.E. Kennedy & P.J. Hunt, 1998. "Implied interest rate pricing models," Finance and Stochastics, Springer, vol. 2(3), pages 275-293.
- Ball, Clifford A. & Torous, Walter N., 1983. "Bond Price Dynamics and Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(04), pages 517-531, December.
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
- Miltersen, K. & K. Sandmann & D. Sondermann, 1994.
"Closed Form Solutions for Term Structure Derivatives with Log-Normal Interest Rates,"
Discussion Paper Serie B
308, University of Bonn, Germany.
- Miltersen, Kristian R & Sandmann, Klaus & Sondermann, Dieter, 1997. " Closed Form Solutions for Term Structure Derivatives with Log-Normal Interest Rates," Journal of Finance, American Finance Association, vol. 52(1), pages 409-30, March.
- Amin, Kaushik I & Ng, Victor K, 1997. "Inferring Future Volatility from the Information in Implied Volatility in Eurodollar Options: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 333-67.
- Farshid Jamshidian, 1997. "LIBOR and swap market models and measures (*)," Finance and Stochastics, Springer, vol. 1(4), pages 293-330.
- Glasserman, P. & Zhao, X., 1998. "Arbitrage-Free Discretization of Lognormal Forward Libor and Swap Rate Models," Papers 98-09, Columbia - Graduate School of Business.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.