Calibration of Multicurrency LIBOR Market Models
AbstractThis paper presents a methodf or calibrating a multi currency lognormal LIBOR Market Model to market data of at-the-money caps, swaptions and FX options. By exploiting the fact that multivariate normal distributions are invariant under orthonormal transformations, the calibration problem is decomposed into manageable stages, while maintaining the ability to achieve realistic correlation structures between all modelled market variables.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 286.
Date of creation: 01 Dec 2010
Date of revision:
currency options; LIBOR market model; exchange rate risk; interest rate risk;
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