A stochastic volatility Libor model and its robust calibration
- Belomestny, Denis
- Mathew, Stanley
- Schoenmakers, John G. M.
2010 Mathematics Subject Classification
- 60G51 62G20 60H05 60H10 90A09 91B28
- Libor modelling, stochastic volatility, CIR processes, calibration
In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration procedure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to implement.
- Monte Carlo Methods Appl., 15 (2009) pp. 285-310 as "Multiple stochastic volatility extension of the Libor market model and its implementation".