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LIBOR Market Model
The LIBOR Market Model (LMM) is the industry standard model
for pricing interest rate derivatives. Based on the Heath-Jarrow-Morton
(HJM) forward rate approach, it builds a process for LIBOR interest
rates, assuming a conditional lognormal process for LIBOR.
Most implementations of the LIBOR Market Model (LMM) use Monte Carlo simulation to
price European-style and Bermudan-style swaptions. Here we illustrate
an alternative, re-combining binomial tree approach.
This website provides all you need to know about the model including
:
- a new approach to building the LIBOR Market Model (LMM), using recombining
binomial tree
- a simple proof of the model and the drift of forward rate
- an illustration of a two-factor implementation of the
methodology for the pricing of swaptions
- details on the calibration of the model to cap and swaption
volatilities
- information on courses on the LIBOR Market Model (LMM) and its construction
- alternative models of interest rate processes - pros and
cons
- important references on the LIBOR Market Model (LMM)
- our consultancy services
Please feel free to browse the site and learn more about the LIBOR Market Model
(LMM) and our new approach to the model. If you have any questions
or would like us to help you implement a solution or training
thenplease contact us by filling in the form
here.
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