A stochastic volatility Libor model and its robust calibration
AbstractIn this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration procedure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to implement.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2007-067.
Length: 26 pages
Date of creation: Dec 2007
Date of revision:
Libor modelling; stochastic volatility; CIR processes; calibration;
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