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Interest Rate Derivatives Explained: Volume 2

Term Structure and Volatility Modelling

  • Jörg Kienitz
  • Peter Caspers

Part of the Financial Engineering Explained book series (FEX)

Table of contents

  1. Front Matter
    Pages i-xxvii
  2. Products

    1. Front Matter
      Pages 1-1
    2. Jörg Kienitz, Peter Caspers
      Pages 3-13
    3. Jörg Kienitz, Peter Caspers
      Pages 15-37
    4. Jörg Kienitz, Peter Caspers
      Pages 39-44
    5. Jörg Kienitz, Peter Caspers
      Pages 45-55
    6. Jörg Kienitz, Peter Caspers
      Pages 57-70
  3. Volatility

    1. Front Matter
      Pages 71-71
    2. Jörg Kienitz, Peter Caspers
      Pages 73-85
    3. Jörg Kienitz, Peter Caspers
      Pages 87-121
  4. Term Structure Models

    1. Front Matter
      Pages 123-123
    2. Jörg Kienitz, Peter Caspers
      Pages 125-137
    3. Jörg Kienitz, Peter Caspers
      Pages 139-173
    4. Jörg Kienitz, Peter Caspers
      Pages 175-181
    5. Jörg Kienitz, Peter Caspers
      Pages 197-219
  5. Back Matter
    Pages 221-248

About this book

Introduction

This book on Interest Rate Derivatives has three parts. The first part is on financial products and extends the range of products considered in Interest Rate Derivatives Explained I. In particular we consider callable products such as Bermudan swaptions or exotic derivatives. The second part is on volatility modelling. The Heston and the SABR model are reviewed and analyzed in detail. Both models are widely applied in practice. Such models are necessary to account for the volatility skew/smile and form the fundament for pricing and risk management of complex interest rate structures such as Constant Maturity Swap options. Term structure models are introduced in the third part. We consider three main classes namely short rate models, instantaneous forward rate models and market models. For each class we review one representative which is heavily used in practice. We have chosen the Hull-White, the Cheyette and the Libor Market model. For all the models we consider the extensions by a stochastic basis and stochastic volatility component. Finally, we round up the exposition by giving an overview of the numerical methods that are relevant for successfully implementing the models considered in the book.
 

Keywords

Financial engineering Derivatives Finance Risk Management Banking Capital market Investments Securities Volatility

Authors and affiliations

  • Jörg Kienitz
    • 1
  • Peter Caspers
    • 2
  1. 1.BonnGermany
  2. 2.ErkelenzGermany

Bibliographic information

  • DOI https://doi.org/10.1057/978-1-137-36019-9
  • Copyright Information The Editor(s) (if applicable) and The Author(s) 2017
  • Publisher Name Palgrave Macmillan, London
  • eBook Packages Economics and Finance
  • Print ISBN 978-1-137-36018-2
  • Online ISBN 978-1-137-36019-9
  • Buy this book on publisher's site