calibration of LMM to swaptions

This forum is to discuss the book "the concepts and practice of mathematical finance" by Mark Joshi.

calibration of LMM to swaptions

Postby quantiago » Mon May 23, 2011 4:43 am

I am trying to implement BGM model for Libor rates.
I am following the road map given in the project 11 in theory and concepts.

For my work I need to calibrate the model to caplet prices as well as to swaptions.
One of my very basic doubt is:

once i calibrate to caplets, all the volatility parameters (a,b,c,d,K's) and the correlation parameter \beta is known.
Then how can i calibrate to swaption prices? as theres know more parameters left for matching.

Thank you very much in advance
quantiago
 
Posts: 4
Joined: Fri May 20, 2011 5:29 am

Re: calibration of LMM to swaptions

Postby mj » Tue May 24, 2011 1:11 am

well there are many different ways to approach this. See for example

http://ssrn.com/abstract=1092665
mj
Site Admin
 
Posts: 1335
Joined: Fri Jul 27, 2007 7:21 am


Return to The concepts and practice of mathematical finance

Who is online

Users browsing this forum: No registered users and 0 guests