One of the key features differentiating methods of calibrating the lognormal LIBOR Market Model (LMM) to observed at-the-money option prices is the way in which these methods handle correlation between forward rates of different maturities. On the basis of the Pedersen (1998) calibration...

Alternative approaches to hedging swaptions are explored and tested by simulation. Hedging methods implied by the Black swaption formula are compared with a lognormal forward LIBOR model approach encompassing all the relevant forward rates. The simulation is undertaken within the LIBOR model...

""I recommend Erik Schlogl's new book to all those interested in model implementation. From quasi-random sequences to HJM to the Excel interface, with full C++ code, there is something here for everyone.""-Jim Gatheral, Presidential Professor, Baruch College, CUNY""If 25 years ago I had started...