Biographical note: RebonatoRiccardo: Riccardo Rebonato is Head of Group Market Risk and Head of the Quantitative Research Centre (QUARC) for the Royal Bank of Scotland Group. He is also a Visiting Lecturer at Oxford University's Mathematical Institute, where he teaches for the MSC/Diploma in...

The paper present a simple, yet surprisingly effective, approximation for the no-arbitrage drifts that appear in LMM(-SABR)-family term structure models. The approximation reduces the burden of the computational bottleneck for these models by one order of magnitude. As the size of the problem...