Interest rate modeling : theory and practice

Description

Containing many results that are new, or which exist only in recent research articles, Interest Rate Modeling: Theory and Practice, 2nd Edition portrays the theory of interest rate modeling as a three-dimensional object of finance, mathematics, and computation. It introduces all models with financial-economical justifications, develops options along the martingale approach, and handles option evaluations with precise numerical methods. Features Presents a complete cycle of model construction and applications, showing readers how to build and use models Provides a systematic treatment of intriguing industrial issues, such as volatility and correlation adjustments Contains exercise sets and a number of examples, with many based on real market data Includes comments on cutting-edge research, such as volatility-smile, positive interest-rate models, and convexity adjustment New to the 2nd edition: volatility smile modeling; a new paradigm for inflation derivatives modeling; an extended market model for credit derivatives; a dual-curved model for the post-crisis interest-rate derivatives markets; and an elegant framework for the xVA.  Read more... 1. The Basics of Stochastic Calculus 2. The Martingale Representation Theorem 3. Interest Rates and Bonds 4. The Heath-Jarrow-Morton Model 5. Short-Rate Models and Lattice Implementation 6. The LIBOR Market Model7. Calibration of LIBOR Market Model 8. Volatility and Correlation Adjustments9. Affine Term Structure Models 10. The Market Model for Inflation-Rate Derivatives.11. Levy Market Model12. Market Model for Inflation Derivatives Modeling13. Market Model for Credit Derivatives 14. Dual-Curve Market Models for Post-Crisis Interest Rate Derivatives Markets15. xVA Definition, Evaluation and Risk Management