Interest Rate Modelling after the Financial Crisis

Interest Rate Modelling after the Financial Crisis

by Massimo Morini and Marco Bianchetti

ISBN-10: 1906348936
ISBN-13: 9781906348939
Publisher: Risk Books
Edition: - 2013

Book Description

Typically literature on the subject of interest rate modelling is based on the assumption of risk-free interest rate markets. Clearly this assumption no longer holds water. As a consequence of the crisis, market participants have been alerted to risk factors which had previously been neglected. This knowledge has led to important changes in the patterns of market data and to new approaches in interest rate modelling.

As interest rate markets continue to innovate and expand in this new landscape, it is becoming increasingly important to remain up-to-date with the latest practical and theoretical developments. In Interest Rate Modelling after the Financial Crisis, Massimo Morini and Marco Bianchetti address and explicate these changes, gathering the latest ideas on post-crisis market modelling and applying new methods to market data and market practice.

In response to the financial crisis, a plethora of new research appeared which attempted to understand, incorporate, and delineate the most significant changes observed in the market. Editors Massimo Morini and Marco Bianchetti have both experienced first-hand how market patterns and consequently trading practices have evolved.

For Interest Rate Modelling after the Financial Crisis, they have assembled a team of expert contributors who articulate and formalise the most important of these changes and the new methodologies which have accompanied them. Contributors include Fabio Mercurio (Senior Quant Researcher at Bloomberg, New York), Akihiko Takahashi (Professor at the Graduate School of Economics, University of Tokyo), Marc Henrard (Member of the Quantitative Research Team at OpenGamma) and Messaoud Chibane (Head of Quantitative Research at Shinsei Bank). Their chapters analyse the latest developments in interest rate modelling, focusing particularly on derivatives markets, derivatives pricing, interest rate term structure and volatility modelling, and interest rate derivatives pricing models.

Key chapters include:

  • Irony in Derivative Discounting: After the Crisis
  • Interest Rate Modelling under the Full Collateralization
  • Multi-Curve Low Dimensional Markovian Models in a HJM Framework
  • LIBOR Market Models with Stochastic Basis