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Table of contents (7 chapters)
Keywords
About this book
Interest rate traders have been using the SABR model to price vanilla products for more than a decade. However this model suffers however from a severe limitation: its inability to value exotic products. A term structure model à la LIBOR Market Model (LMM) is often employed to value these more complex derivatives, however the LMM is unable to capture the volatility smile. A joint SABR LIBOR Market Model is the natural evolution towards a consistent pricing of vanilla and exotic products. Knowledge of these models is essential to all aspiring interest rate quants, traders and risk managers, as well an understanding of their failings and alternatives.
SABR and SABR Libor Market Models in Practice is an accessible guide to modern interest rate modelling. Rather than covering an array of models which are seldom used in practice, it focuses on the SABR model, the market standard for vanilla products, the LIBOR Market Model, the most commonly used model for exotic products andthe extended SABR LIBOR Market Model. The book takes a hands-on approach, demonstrating simply how to implement and work with these models in a market setting. It bridges the gap between the understanding of the models from a conceptual and mathematical perspective and the actual implementation by supplementing the interest rate theory with modelling specific, practical code examples written in Python.
About the authors
Gérald Wigger is Head of Quantitative Analysis at Weisshorn Re. He previously worked in various roles such as Head of Pricing at Axa Winterthur, Head of Risk Modeling at Zürcher Kantonalbank and Interest Rate Derivatives Quant at Bank of America Merril Lynch. Gérald holds a PhD in Solid State Physics from ETH Zurich.
Peter Larkin is a Data Scientist working on building predictive models using big data in the (re) insurance industry. Previously he worked as a Quantitative Analyst in the financial services industry working on projects spanning the pricing of structured products, credit and market risk, and asset management. Peter has a background in Theoretical Physics and received his PhD from the University of York in 2008, previously having obtained his Masters at Cambridge University and BSc at Imperial College London. In 2012 he also completed a MSc in Mathematical Finance from the University of Oxford.
Bibliographic Information
Book Title: SABR and SABR LIBOR Market Models in Practice
Book Subtitle: With Examples Implemented in Python
Authors: Christian Crispoldi, Gérald Wigger, Peter Larkin
Series Title: Applied Quantitative Finance
DOI: https://doi.org/10.1057/9781137378644
Publisher: Palgrave Macmillan London
eBook Packages: Palgrave Economics & Finance Collection, Economics and Finance (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s) 2015
Hardcover ISBN: 978-1-137-37863-7Published: 29 September 2015
eBook ISBN: 978-1-137-37864-4Published: 29 April 2016
Series ISSN: 2947-700X
Series E-ISSN: 2947-7018
Edition Number: 1
Number of Pages: XXI, 216
Topics: Econometrics, Banking, Finance, general, Science, Humanities and Social Sciences, multidisciplinary