Modern Pricing of Interest-Rate Derivatives
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A01=Riccardo Rebonato
Arbitrage
Author_Riccardo Rebonato
Bond Yield
Calculation
Cash flow
Category=KC
Category=KFFM
Computational finance
Covariance matrix
Cross-Currency Swap
Currency
Derivative (finance)
Discount function
Discounts and allowances
Economic equilibrium
Efficient-market hypothesis
eq_bestseller
eq_business-finance-law
eq_isMigrated=1
eq_isMigrated=2
eq_nobargain
eq_non-fiction
Expected value
Finance
Financial modeling
Forward rate
Forward Swap
Futures contract
Hedge (finance)
Hedge fund
Hedging Transaction
Insurance
Interest rate
Interest rate cap and floor
Interest-Rate Derivative
Investment
Liability (financial accounting)
LIBOR market model
Market (economics)
Market data
Market liquidity
Market price
Market value
Martingale (probability theory)
Mathematical finance
Monetary authority
Money market
Moneyness
Monte Carlo method
Numeraire
Option (finance)
Predictor-corrector method
Present value
Price signal
Pricing
Principal component analysis
Puttable bond
Quantitative analyst
Rates (tax)
Real interest rate
Relative value (economics)
Replicating portfolio
Repurchase agreement
Risk premium
Savings account
Securities market
Security (finance)
Stochastic calculus
Stochastic differential equation
Stochastic volatility
Supply (economics)
Supply and demand
Swap (finance)
Swap rate
Swaption
Terminal value (finance)
Theoretical Value
Trading strategy
Yield curve
Product details
- ISBN 9780691089737
- Weight: 851g
- Dimensions: 152 x 235mm
- Publication Date: 24 Nov 2002
- Publisher: Princeton University Press
- Publication City/Country: US
- Product Form: Hardback
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In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. The academic and practitioners' communities, however, have not always communicated as productively as would have been desirable. As a result, their research programs have often developed with little constructive interference. In this book, Riccardo Rebonato draws on his academic and professional experience, straddling both sides of the divide to bring together and build on what theory and trading have to offer. Rebonato begins by presenting the conceptual foundations for the application of the LIBOR market model to the pricing of interest-rate derivatives. Next he treats in great detail the calibration of this model to market prices, asking how possible and advisable it is to enforce a simultaneous fitting to several market observables. He does so with an eye not only to mathematical feasibility but also to financial justification, while devoting special scrutiny to the implications of market incompleteness. Much of the book concerns an original extension of the LIBOR market model, devised to account for implied volatility smiles.
This is done by introducing a stochastic-volatility, displaced-diffusion version of the model. The emphasis again is on the financial justification and on the computational feasibility of the proposed solution to the smile problem. This book is must reading for quantitative researchers in financial houses, sophisticated practitioners in the derivatives area, and students of finance.
Riccardo Rebonato is Head of Group Market Risk and Head of the Quantitative Research Centre (QUARC) for the Royal Bank of Scotland Group. He is also a Visiting Lecturer at Oxford University's Mathematical Institute, where he teaches for the MSC/Diploma in Mathematical Finance. His books include "Interest-Rate Option Models" and "Volatility and Correlation in Option Pricing".
