A stochastic volatility libor model and its robust calibration

Denis Belomestny; Stanley Matthew; John Schoenmakers

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to implement. -- Libor modelling ; stochastic volatility ; CIR processes ; calibration

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Year of publication:	12 Dec. 2007
Other Persons:	Belomestny, Denis (contributor) ; Matthew, Stanley (contributor) ; Schoenmakers, John (contributor)
Publisher:	Berlin : SFB 649, Economic Risk
Subject:	Zinsstruktur \| Yield curve \| Zinsderivat \| Interest rate derivative \| Optionspreistheorie \| Option pricing theory \| Volatilität \| Volatility \| Stochastischer Prozess \| Stochastic process \| Robustes Verfahren \| Robust statistics \| Theorie \| Theory