The LIBOR market model is a financial model of interest rates. It is used for pricing interest rate derivatives. The quantities that are modeled are a set of forward rates (also called forward LIBORs), which have the advantage of being directly observable in the market, and whose volatilities are ...

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Price 3m libor autocap with LMM calibrated on 1y swaption data

I need to calculate a price of an autocap contract which is An autocap is similar to a cap, but at most γ ≤ β caplets can be exercised, and they have to be automatically exercised when in the ...
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LMM. Calibration to swaptions by Brigo and Morini. Volatility of swaption that matures at T=0

I'm reading Brigo D., Mercurio F. Interest Rate Models - Theory and Practice (Springer, 2006)(ISBN 3540221492) and also a source article on LMM cascade calibration to swaptions by Brigo and Morini. I ...
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Incompatibility of Lognormal Forward Model (LMM\BGM) and Lognormal Swap Model

In his paper On the distributional distance between the Libor and the Swap market models (and also in his book about IR modeling) D.Brigo says: 10, 11, 12 are defined in the end of message. Do I ...
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Calibration Problem in the LMM-Skew (Shifted Diffusion) Model

I have implemented the LIBOR market model (LMM) and I am quite satisfied with the results. I have now added a skew to the model as described in 10.1 of Brigo/Mercurio. That is, I have replaced the SDE ...
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question on Leif Andersen's “Interest Rate Modeling, vol 2 Term Structure Models”

I'm reading Leif Andersen's "Interest Rate Modeling, vol 2 Term Structure Models" and met a problem on Chapter 14 LM Dynamics and Measures, $\S$ 14.2.5 Stochastic Volatility, Lemma 14.2.6, on page ...
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When is the LIBOR market model Markovian?

The question is inspired by a short passage on the LMM in Mark Joshi's book. The LMM cannot be truly Markovian in the underlying Brownian motions due to the presence of state-dependent drifts. ...
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Rate interpolation in Libor Market Model

Libor Market Model (LMM) models the interest rate market by simulating a set of simply compounded, non-overlapping Libor rates which reset and mature on predefined dates. How do I obtain from them a ...