back to Damiano Brigo’s professional page. Interest Rate Models: Theory and Practice – With Smile, Inflation and Credit. (, 2nd Ed. ) by Damiano Brigo. Interest Rate Models – Theory and Practice: With Smile, Inflation and Credit. Front Cover · Damiano Brigo, Fabio Mercurio. Springer Science. The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably.

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The goal is then teory find conditions under which arbitrage is impossible, i. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach.

Ensuring that interest rates remain positive is thought of as an important side constraint by many modelers, who point to the large negative rates that may occur in Gaussian models of interest rates. Of particular importance is the appearance of copulas in chapter 21, which have been criticized lately for their alleged role in the “financial crisis”.

The first part of the book sets the tone for the rest of the book, and can be considered as an elementary introduction to the theory of contingent claim valuation. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs The theory is interwoven with detailed numerical examples.


Interest Rate Models Theory and Practice – Damiano Brigo, Fabio Mercurio – Google Books

Selected pages Title Page. The calibration must then be done simultaneously when this is not the case. Arguments are given as to whether all choices of kernel can result in viable interest briggo models. The book is written very well, with calculation steps for the most part included in detail. It’s great as expected. Their strategy is to enforce positivity via the discount factor, and doing this in such a way so as to eliminate theofy possibility of “explosions”, i.

A solid, widely accepted reference on fixed income modeling.

Their model can essentially be characterized by an integral representation for discount bonds in terms of a family of kernel functions. International Statistical Institute short book reviews. Detalhes do produto Formato: Examples of calibrations to real market data are now considered.

One has to address a number of practical issues that are often neglected in the theory, such as the choice of a satisfactory model, the calibration of intereet selected model to a set of market data, the implementation of efficient routines, and so on. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into a new chapter. With Smile, Inflation and Credit.

Professional Area of Damiano Brigo’s web site

Praise for the first edition. Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments. This is the book on brugo rate models and should proudly stand on the bookshelf of every quantitative finance practitioner and student involved with interest rate models. Compartilhe seus pensamentos com outros clientes.


The authors give an overview of these entities for the curious reader but do not use them in thwory book. The 2nd edition of this successful book has several new features.

I really enjoyed the experience having him as my Professor. Praise for the Second edition.

Interest Rate Models Theory and Practice

Damiano PractiecFabio Mercurio. For credit risk, the defaultable zero coupon bond is the analog of the zero coupon bond for interest rate curves. Leia mais Leia menos. The authors want to go beyond this model by searching for one that will reproduce any observed term structure of interest an but that will preserve analytical tractability. This book was read and studied between the dates of September and July The book will most likely become … one of the standard references in the area.