A multiobjective approach using consistent rate curves to the calibration of a Gaussian Heath-Jarrow-Morton model
In this paper we propose an alternate calibration algorithm, by using a consistent family of yield curves, that fits a Gaussian Heath-Jarrow-Morton model jointly to the implied volatilities of caps and zero-coupon bond prices. The algorithm is capable for finding several Pareto optimal points as is expected for a general nonlinear multicriteria optimization problem. The calibration approach is evaluated in terms of in-sample data fitting as well as stability of parameter estimates. Furthermore, the efficiency is tested against a non-consistent traditional method by using simulated and US market data.
|Date of creation:||Apr 2008|
|Date of revision:|
|Publication status:||Published by Ivie|
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