Falcó, Antonio; Nave, Juan; Navarro, Lluís - Instituto Valenciano de Investigaciones Económicas (IVIE) - 2008
In this paper we propose an alternate calibration algorithm, by using a consistent family of yield curves, that fits a Gaussian Heath-Jarrow-Morton model jointly to the implied volatilities of caps and zero-coupon bond prices. The algorithm is capable for finding several Pareto optimal points as...