back to Damiano Brigo’s professional page. Interest Rate Models: Theory and Practice – With Smile, Inflation and Credit. (, 2nd Ed. ) by Damiano Brigo. Basic concepts of stochastic modeling in interest rate theory, As a standard reference on interest rate theory I recommend. [Brigo and Mercurio()]. 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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Professional Area of Damiano Brigo’s web site

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 the selected model to a set of market data, the implementation of efficient routines, and so on. Examples of calibrations to real market data are now considered.

This is the book on interest rate models and should proudly stand on the bookshelf of every quantitative finance practitioner and student involved with interest rate models.

Advanced undergraduate students, graduate students and researchers should benefit as well from seeing how some sophisticated mathematics can be used in concrete financial problems.

Praise for the first edition. The 2nd edition of this successful book has rwte new features. The three final new chapters intdrest this second ratd are devoted to credit.

Damiano BrigoFabio Mercurio. A special focus here is devoted to the pricing of inflation-linked derivatives. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into a new part.

A special focus here is devoted to the pricing of inflation-linked derivatives. This is a very detailed course on interest rate models.

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

Selected pages Title Page. The fact that the authors combine a interwst mathematical finance background with expert practice knowledge they both work in a bank contributes hugely to its format. Sample text from the book prefacefeaturing a description by chapter. Damiano BrigoFabio Mercurio. The three final new chapters of this second edition are devoted to credit.

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Interest Rate Models – Theory and Practice

Beliaeva Limited preview – Interesst discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced.

For those who have a sufficiently strong mathematical background, this book is a must.

International Statistical Institute short book reviews. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into several new chapters. Thus the book can help quantitative analysts and advanced traders price and hedge interest-rate derivatives with a sound theoretical apparatus, explaining which models can be used in practice for some major concrete problems.

Interest Rate Models – Theory and Practice: In Mathematical Reviews, d. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption -volatility interpolation technique has been introduced.

It perfectly combines mathematical depth, historical perspective and practical relevance. Moreover, the book can help academics develop a feeling for the practical problems in the market that can be solved with the use of relatively advanced tools of mathematics and stochastic calculus in particular.

Points of Interest, book review for Risk Magazine, November References to this book Dynamic Term Structure Modeling: Examples of calibrations to real market data are now considered. This is the publisher web site. The text is no doubt my favourite on the subject of interest rate modelling. User Review – Flag as inappropriate Necessity for a future quant, needed by bankers.

The three final new chapters of this second edition are devoted to credit. 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 Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments. The theory is interwoven with detailed numerical examples.

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Overall, this is by far the best interest rate models book in ratd market. New chapters on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach. 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.

Therefore, this book aims both at explaining rigorously how models work in theory and at suggesting how to implement them for concrete pricing. This is an area that is rarely covered by books on mathematical finance. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced.

Interest Inetrest Models – Theory and Practice: Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives — mostly Credit Default Swaps CDSCDS Options and Constant Maturity CDS – are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market.

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.

The authors’ applied background allows for numerous comments on why certain models have or have not made it in practice. The fast-growing interest for hybrid products has led to new chapters.