***** Date limite d inscription / Registration deadline *****
***** Sept 19, 2001 *********
L'Association FRONTIERES EN FINANCE
http://www.frontiers-in-finance.com/
a le plaisir de vous annoncer le prochain
PETIT DEJEUNER DE LA FINANCE
Mercredi 26 Septembre 2001, de 8h a 9h30
Maison de la Chimie, 28 rue Saint Dominique 75007 Paris.
Metro: Assemblee Nationale (Lignes 8 et 13).
avec une presentation de:
Mark JOSHI
( Quantitative Research Centre - Royal Bank of Scotland ).
A stochastic volatility extension of the LIBOR market model
We present an extension of the LIBOR market model which allows for
stochastic instantaneous volatilities of the forward
rates in a displaced diffusion setting. We show that virtually all the
powerful and important approximations that apply in the deterministic
setting can be successfully and naturally extended to the stochastic
volatility case. In particular we show that i) the caplet market can still
be efficiently and accurately fit;
ii) that the drift approximations that allow the evolution of the
forward rates over time steps as long as several years are still valid;
iii) that in the new setting the European swaption
matrix implied by a given choice of volatility parameters can be efficiently
approximated with a closed-form expression without having to carry out a
Monte Carlo simulation for the forward-rate process; and
iv) that it is still possible to
calibrate the model virtually perfectly via simply matrix manipulations so
that the prices of the co-terminal swaptions underlying a given Bermudan
swaption will be exactly recovered, while retaining a desirable behaviour
for the evolution of the term structure of volatilities.
* About the speaker:
Mark Joshi is member of the Quantitative Research Centre of the Royal Bank
of Scotland. After obtaining a PhD in Mathematics from MIT in 1994 for his
research on partial differential equations, he served as Assistant Lecturer
in the Department of Pure Mathematics and Mathematical Statistics,
University of Cambridge from 1994 to 1999. He joined (NatWest) Group Risk in
1999 as senior quantitative analyst and was subsequently appointed Head of
model evaluation in Sep 2001 at the Royal Bank of Scotland.
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The Petit Dejeuner de la Finance is a monthly seminar organized in Paris by
Frontiers in Finance, a non profit association aimed at the diffusion of
quantitative methods in risk management.
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vous inscrire, envoyer la fiche d'inscription
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par telecopie au
01 41 16 71 71.
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Frontières en Finance
http://www.frontiers-in-finance.com/
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