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- LIBOR_market_model abstract "The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing interest rate derivatives, especially exotic derivatives like Bermudan swaptions, ratchet caps and floors, target redemption notes, autocaps, zero coupon swaptions, constant maturity swaps and spread options, among many others. The quantities that are modeled, rather than the short rate or instantaneous forward rates (like in the Heath-Jarrow-Morton framework) are a set of forward rates (also called forward LIBORs), which have the advantage of being directly observable in the market, and whose volatilities are naturally linked to traded contracts. Each forward rate is modeled by a lognormal process under its forward measure, i.e. a Black model leading to a Black formula for interest rate caps. This formula is the market standard to quote cap prices in terms of implied volatilities, hence the term "market model". The LIBOR market model may be interpreted as a collection of forward LIBOR dynamics for different forward rates with spanning tenors and maturities, each forward rate being consistent with a Black interest rate caplet formula for its canonical maturity. One can write the different rates dynamics under a common pricing measure, for example the forward measure for a preferred single maturity, and in this case forward rates will not be lognormal under the unique measure in general, leading to the need for numerical methods such as monte carlo simulation or approximations like the frozen drift assumption.".
- LIBOR_market_model wikiPageExternalLink applets.
- LIBOR_market_model wikiPageExternalLink bocconi.html.
- LIBOR_market_model wikiPageExternalLink libormarketmodel.
- LIBOR_market_model wikiPageID "5205955".
- LIBOR_market_model wikiPageRevisionID "552626230".
- LIBOR_market_model hasPhotoCollection LIBOR_market_model.
- LIBOR_market_model subject Category:Finance_theories.
- LIBOR_market_model subject Category:Fixed_income_analysis.
- LIBOR_market_model subject Category:Interest_rates.
- LIBOR_market_model subject Category:Mathematical_finance.
- LIBOR_market_model type Abstraction100002137.
- LIBOR_market_model type Charge113306870.
- LIBOR_market_model type Cost113275847.
- LIBOR_market_model type InterestRate113319032.
- LIBOR_market_model type InterestRates.
- LIBOR_market_model type Outgo113275288.
- LIBOR_market_model type Possession100032613.
- LIBOR_market_model type Rate113325010.
- LIBOR_market_model type Relation100031921.
- LIBOR_market_model type TransferredProperty113252973.
- LIBOR_market_model comment "The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing interest rate derivatives, especially exotic derivatives like Bermudan swaptions, ratchet caps and floors, target redemption notes, autocaps, zero coupon swaptions, constant maturity swaps and spread options, among many others.".
- LIBOR_market_model label "LIBOR market model".
- LIBOR_market_model label "LIBOR-Markt-Modell".
- LIBOR_market_model sameAs LIBOR-Markt-Modell.
- LIBOR_market_model sameAs m.0d7sm5.
- LIBOR_market_model sameAs Q1225659.
- LIBOR_market_model sameAs Q1225659.
- LIBOR_market_model sameAs LIBOR_market_model.
- LIBOR_market_model wasDerivedFrom LIBOR_market_model?oldid=552626230.
- LIBOR_market_model isPrimaryTopicOf LIBOR_market_model.