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Economics | Calibration and Parameterization Methods for the Libor Market Model

Calibration and Parameterization Methods for the Libor Market Model

Series: BestMasters

Hackl, Christoph

2014, IX, 64 p. 27 illus.

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  • Study in the field of economic science

The Libor Market Model (LMM) is a mathematical model for pricing and risk management of interest rate derivatives and has been built on the framework of modelling forward rates. For the conceptual understanding of the model a strong background in the fields of mathematics, statistics, finance and, especially for implementation, computer science is necessary. The book provides the necessary groundwork to understand the LMM and delivers a framework to implement a working model where possible calibration and parameterization methods for volatility and correlation are explained. Special emphasis lies also on the tradeoff of speed and correctness where differences in choosing random number generators and the advantages of factor reduction are shown.




  • Libor Market Model implementation framework
  • Speed vs. correctness
  • Application examples and possible extensions



Target Groups

  • Researchers and advanced master degree students in a quantitative field (Mathematics, Quant. Finance, Statistics, Physics)
  • Practitioners in the quantitative area of the financial services industry

The Author

Christoph Hackl, MA obtained his master’s degree at the UAS bfi Vienna in the programme „Quantitative Asset and Risk Management“.

Content Level » Research

Keywords » Forward Rate Model - Interest rate derivatives pricing - Libor Market Model - Quasi and pseudo random numbers - Term Structure Model

Related subjects » Wirtschaft, Finanzen, Soziales

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