Interest Rate Modelling after the Financial Crisis
Interest Rate Modelling after the Financial Crisis
Massimo Morini and Marco Bianchetti
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Typically literature on the subject of interest rate modelling is based on the assumption of risk-free interest rate markets. Clearly this assumption no longer holds water. As a consequence of the crisis, market participants have been alerted to risk factors which had previously been neglected. This knowledge has led to important changes in the patterns of market data and to new approaches in interest rate modelling.
As interest rate markets continue to innovate and expand in this new landscape, it is becoming increasingly important to remain up-to-date with the latest practical and theoretical developments. In Interest Rate Modelling after the Financial Crisis, Massimo Morini and Marco Bianchetti address and explicate these changes, gathering the latest ideas on post-crisis market modelling and applying new methods to market data and market practice.
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About the Author
Massimo Morini and Marco Bianchetti
In response to the financial crisis, a plethora of new research appeared which attempted to understand, incorporate, and delineate the most significant changes observed in the market. Editors Massimo Morini and Marco Bianchetti have both experienced first-hand how market patterns and consequently trading practices have evolved.
For Interest Rate Modelling after the Financial Crisis, they have assembled a team of expert contributors who articulate and formalise the most important of these changes and the new methodologies which have accompanied them. Contributors include Fabio Mercurio (Senior Quant Researcher at Bloomberg, New York), Akihiko Takahashi (Professor at the Graduate School of Economics, University of Tokyo), Marc Henrard (Member of the Quantitative Research Team at OpenGamma) and Messaoud Chibane (Head of Quantitative Research at Shinsei Bank). Their chapters analyse the latest developments in interest rate modelling, focusing particularly on derivatives markets, derivatives pricing, interest rate term structure and volatility modelling, and interest rate derivatives pricing models.
Table of contents
Part I: Interest Rate Markets Across the Crunch
1 : Evolution of the Markets after the Credit Crunch Marco Bianchetti and Mattia Carlicchi Banca Intesa Sanpaolo
2 : Solving the Puzzle in the Interest Rate Market Massimo Morini Banca IMI, Milan
Part II: Modern Pricing of Interest Rate Derivatives
3:Modern Pricing of Interest Rate Derivatives including Funding and Collateral Marco Bianchetti Banca Intesa Sanpaolo
4 : Bootstrapping the Illiquidity: Multiple Yield Curves Construction for Market Coherent Discount and FRA Rates Estimation Ferdinando M. Ametrano; Marco Bianchetti Banca IMI; Banca Intesa Sanpaolo
5:Irony in Derivative Discounting: After the Crisis Marc Henrard OpenGamma
6 : Interest Rate Modelling under Full Collateralisation Masaaki Fujii and Akihiko Takahashi Graduate School of Economics, The University of Tokyo
7 : Building Curves on a Good Basis Messaoud Chibane, Japrakash Selvaraj; Guy Sheldon Shinsei Bank Limited; ANZ Banking Corporation
Part III: New Interest Rate Models
8 : Libor Market Models with Stochastic Basis Fabio Mercurio Bloomberg LP
9 : Calibration, Simulation and Hedging in a Heston Libor Market Model with Stochastic Basis Ahsan Amin Infiniti Derivatives
10:Parsimonious Multi-Curve HJM Modelling with Stochastic Volatility Nicola Moreni, Andrea Pallavicini Banca IMI
11:Multi-Curve Low Dimensional Markovian Models in a HJM Framework Manuel Torrealba Palacios Nordea
12:Short Rate Models with Stochastic Basis and Smile Chris Kenyon Lloyds Banking Group