A jump-diffusion Libor model and its robust calibration

In this paper we propose a jump-diffusion Libor model with jumps in ahigh-dimensional space (R^m) and test a stable non-parametric calibrationalgorithm which takes into account a given local covariance structure.The algorithm returns smooth and simply structured Lévy densities, andpenalizes the deviation from the Libor market model. In practice, theprocedure is FFT based, thus fast, easy to implement, and yields goodresults, particularly in view of the severe ill-posedness of the underlyinginverse problem.