k**k
发帖数: 61 | 1 Just wondering where I can find some examples that show the entire process
of calibrating the BGM/LIBOR market model?
Specifically, I'm looking not just for market data such as caplet/swaption
volatilities, but also the extra assumptions/constraints that users apply to
resolve all remaining degree of freedom in the model?
I know this could be too much to ask for, but can someone at least shed some
lights on what are the usual assumptions used to resolve the extra DOF? e.g
. correlation betwee | i****e
发帖数: 78 | 2 I guess that you can try few ways
1) reduce the degree of freedom in your model, i.e., reduce model
parameters, use simpler model.
2) or try to calibrate to more market data. for example, if you want
to calibrate the correlation, find some liquid options, which are
sensitive to correlation.
3) or use historical data to determine the undetermined model parameters.
to
some
.g
【在 k**k 的大作中提到】
: Just wondering where I can find some examples that show the entire process
: of calibrating the BGM/LIBOR market model?
: Specifically, I'm looking not just for market data such as caplet/swaption
: volatilities, but also the extra assumptions/constraints that users apply to
: resolve all remaining degree of freedom in the model?
: I know this could be too much to ask for, but can someone at least shed some
: lights on what are the usual assumptions used to resolve the extra DOF? e.g
: . correlation betwee
| k**k
发帖数: 61 | 3 Thanks! but still a few questions below.
How? All I can see is reduce # of factors (say 2 Brownian motion instead of
3) or reduce the rates included (say only extend to 10 yr instead of 30 yrs)
What else can we use besides caplet/European swaptions that are liquid
enough?
How this works?
【在 i****e 的大作中提到】
: I guess that you can try few ways
: 1) reduce the degree of freedom in your model, i.e., reduce model
: parameters, use simpler model.
: 2) or try to calibrate to more market data. for example, if you want
: to calibrate the correlation, find some liquid options, which are
: sensitive to correlation.
: 3) or use historical data to determine the undetermined model parameters.
:
: to
: some
| i****e
发帖数: 78 | 4 I am not the expert in this area, so I may not be able to
answer all your questions. There is a good book may be able to help you:
Modern Pricing of Interest-Rate Derivatives, by Riccardo Rebonato
There are concrete examples and procedures in this book may help you.
1) Yes, reduce from 3 factor to 2 factor model is a way to reduce
model parameters.
2) Swaptions contains correlation information, it
should be enough if you want to calibrate correlation model parameters.
3) for example, if you have
【在 k**k 的大作中提到】
: Thanks! but still a few questions below.
:
: How? All I can see is reduce # of factors (say 2 Brownian motion instead of
: 3) or reduce the rates included (say only extend to 10 yr instead of 30 yrs)
: What else can we use besides caplet/European swaptions that are liquid
: enough?
: How this works?
| k**k
发帖数: 61 | 5 That's good enough, Thank!
【在 i****e 的大作中提到】
: I am not the expert in this area, so I may not be able to
: answer all your questions. There is a good book may be able to help you:
: Modern Pricing of Interest-Rate Derivatives, by Riccardo Rebonato
: There are concrete examples and procedures in this book may help you.
: 1) Yes, reduce from 3 factor to 2 factor model is a way to reduce
: model parameters.
: 2) Swaptions contains correlation information, it
: should be enough if you want to calibrate correlation model parameters.
: 3) for example, if you have
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