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Moment Explosion in the LIBOR Market Model

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  • Stefan Gerhold

Abstract

In the LIBOR market model, forward interest rates are log-normal under their respective forward measures. This note shows that their distributions under the other forward measures of the tenor structure have approximately log-normal tails.

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  • Stefan Gerhold, 2010. "Moment Explosion in the LIBOR Market Model," Papers 1008.2104, arXiv.org.
    • Handle: RePEc:arx:papers:1008.2104
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    1. Alan Brace & Dariusz G¸atarek & Marek Musiela, 1997. "The Market Model of Interest Rate Dynamics," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 127-155, April.
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    Cited by:

    1. Ren‐Raw Chen & Pei‐Lin Hsieh & Jeffrey Huang & Xiaowei Li, 2023. "Predictive power of the implied volatility term structure in the fixed‐income market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(3), pages 349-383, March.

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