Libor Market Model Implementation

Question

I'm trying to implement an LMM-MultiCurve for caplet pricing following the analytical formula mentioned in this article (pg 20):

https://www.researchgate.net/publication/326012245_LIBOR_market_model_with_multiplicative_basis

However, I didn't get the same results. I think my error comes from the lack of understanding regarding the evolution of LIBOR rate and its tenor structure.

Could anyone give me some insight about it ?

For example a Caplet with Expiry of 3year with tenor = 0.5 has to be priced (following the analytical formula) with the LIBOR rate L(0,2.5,3). Am I getting it right ?

Many thanks for your help.

Answer 1

For example a Caplet with Expiry of 3year with tenor = 0.5 has to be priced (following the analytical formula) with the LIBOR rate L(0,2.5,3). Am I getting it right ?

Thats right. The caplet hast a tenor of half a year and expires in 3 more years, therefore it starts at T =2.5 and ends at T = 3. (Which in this case is the forward rate)