Modelling Interest Rates is an invaluable aid to researchers who aim to get acquainted with the new trends in the interest rate models and to practitioners with a need to use increasingly sophisticated tools to price exotic claims consistently with the information on the underlying variables that is provided by the market in terms of “plain vanilla” quotes.

This book will be essential reading for:

• Interest rate modellers
• Risk managers
• Risk modellers
• Interest rate analysts
• Derivatives traders
• Pricing managers

PART I MULTI-CURVE MODELLING
1 Bootstrapping the Illiquidity
Ferdinando M. Ametrano; Marco Bianchetti
Banca IMI; Banca IntesaSanpaolo

2 Yield Spread Options under the DLG Model
Masaaki Kijima, Keiichi Tanaka; Tony Wong
Tokyo Metropolitan University; Mizuho Securities Co Ltd

PART II NEW ADVANCES ON LIBOR MARKET MODELS
3 Nonparametric Calibration of Forward Rate Models
Dariusz Gatarek
National Bank of Poland and Systems Research Institute PAS

4 On the Calibration of the Market Model with a Square-Root
Volatility Process
Lixin Wu
The Hong Kong University of Science and Technology

5 No-Arbitrage Dynamics and Formulas for a Tractable SABR
Term-Structure Model
Fabio Mercurio; Massimo Morini
Bloomberg; Banca IMI

6 The Longstaff–Schwartz Algorithm and Effective Model
Dimensionality
Phil Hunt; Joanne Kennedy
Citigroup; University of Warwick

PART III HEDGING ISSUES
7 Dynamics Misspecification in Local-Stochastic Volatility Models
Giuseppe Di Graziano; Stefano Galluccio
Deutsche Bank; BNP Paribas

8 A Note on Hedging with Local and Stochastic Volatility Models
Fabio Mercurio; Massimo Morini
Bloomberg; Banca IMI

PART IV THE PRICING OF SPECIFIC CONTRACTS
9 Libor Volatility Derivatives
Nicolas Merener
Universidad Torcuato Di Tella

10 Smile-Consistent CMS Adjustments in Closed Form
Antonio Castagna, Fabio Mercurio and Marco Tarenghi
Banca IMI

11 Cap Pricing in Term-Structure Models with Stochastic Volatility
Ali Hirsa, Li Bao; Dilip B. Madan
Caspian Capital Management, LLC; University of Maryland

Fabio Mercurio is Senior Quant Researcher at Bloomberg, New York. He holds a BSc in Applied Mathematics from the University of Padua and a Ph.D. in Mathematical Finance from the Erasmus University of Rotterdam.

His recent scientific interests include interest rate and inflation modelling, the pricing of hybrids and the smile modelling for the main asset classes. Fabio has published several articles in journals such as Mathematical Finance, Quantitative Finance, Finance and Stochastics and Risk.