Interest Rate Modeling. Volume 2: Term Structure Models - Hardcover

Andersen, Leif B G; Piterbarg, Vladimir V

Hardcover

ISBN 10: 0984422110 ISBN 13: 9780984422111

Publisher: Atlantic Financial Press, 2010

Synopsis

Table of contents for all three volumes (full details at andersen-piterbarg-book.com)

Volume I. Foundations and Vanilla Models

      Part I. Foundations

• Introduction to Arbitrage Pricing Theory
• Finite Difference Methods
• Monte Carlo Methods
• Fundamentals of Interest Rate Modelling
• Fixed Income Instruments

      Part II. Vanilla Models

• Yield Curve Construction and Risk Management
• Vanilla Models with Local Volatility
• Vanilla Models with Stochastic Volatility I
• Vanilla Models with Stochastic Volatility II 

Volume II. Term Structure Models

      Part III. Term Structure Models

• One-Factor Short Rate Models I
• One-Factor Short Rate Models II
• Multi-Factor Short Rate Models
• The Quasi-Gaussian Model with Local and Stochastic Volatility
• The Libor Market Model I
• The Libor Market Model II

Volume III. Products and Risk Management

      Part IV. Products

• Single-Rate Vanilla Derivatives
• Multi-Rate Vanilla Derivatives
• Callable Libor Exotics
• Bermudan Swaptions 
• TARNs, Volatility Swaps, and Other Derivatives
• Out-of-Model Adjustments

      Part V. Risk management

• Fundamentals of Risk Management  
• Payoff Smoothing and Related Methods 
• Pathwise Differentiation 
• Importance Sampling and Control Variates 
• Vegas in Libor Market Models 

      Appendix

• Markovian Projection 

About this title

About the Author

Leif B.G. Andersen is a Managing Director and the Co-Head of the Global Quantitative Group at Bank of America Merrill Lynch, and is an adjunct professor at NYU's Courant Institute of Mathematical Sciences. He holds MS degrees in Electrical and Mechanical Engineering from the Technical University of Denmark, an MBA from University of California at Berkeley, and a PhD in Finance from Aarhus Business School. He was the recipient of Risk Magazine's 2001 Quant of the Year Award, and has worked since 1993 as a quantitative researcher in the derivatives pricing area. He has authored many influential research papers in all areas of quantitative finance, and is an associate editor of the Journal of Computational Finance. Vladimir V. Piterbarg is a Managing Director and the Global Head of the Quantitative Analytics group at Barclays Capital, and has worked since 1997 as an interest rate quant at top investment banks. He taught at the University of Chicago Mathematical Finance program for a number of years, and is a prolific and respected researcher in the area of interest rate modeling. He won Risk Magazine's 2006 Quant of the Year Award, and holds a PhD in Mathematics (Probability Theory) from the University of Southern California. He serves as an associate editor of the Journal of Computational Finance.

From the Back Cover

The three volumes of Interest Rate Modeling present a comprehensive and up-to-date treatment of techniques and models used in the pricing and risk management of fixed income securities. Written by two leading practitioners and seasoned industry veterans, this unique series combines finance theory, numerical methods, and approximation techniques to provide the reader with an integrated approach to the process of designing and implementing industrial-strength models for fixed income security valuation and hedging. Aiming to bridge the gap between advanced theoretical models and real-life trading applications, the pragmatic, yet rigorous, approach taken in this book will appeal to students, academics, and professionals working in quantitative finance.

Volume II is dedicated to in-depth study of term structure models of interest rates. While providing a thorough analysis of classical short rate models, the primary focus of the volume is on multi-factor stochastic volatility dynamics, in the setups of both the separable HJM and Libor market models. Implementation techniques are covered in detail, as are strategies for model parameterization and calibration to market data.

"The valuation of interest rate derivatives is one of the most exciting and challenging areas of mathematical finance. Andersen and Piterbarg are to be congratulated on moving our understanding of this to a new level. Their comprehensive and rigorous three-volume work takes the reader through all the stages necessary for a complete understanding of the full range of work that has been done. Everything from the construction of a `smooth' forward curve to the calibration and use of sophisticated multi-factor models is included. The book will be a valuable resource for both trading rooms and academic researchers.''

John Hull, Maple Financial Professor of Derivatives and Risk Management, Joseph L. Rotman School of Management, University of Toronto

From the Inside Flap

"In the seventies, Arbitrage Pricing Theory (APT) was invented for equity derivatives. Now, more than 30 years later, the arena of interest rate derivatives has its own APT: the Andersen-Piterbarg Textbook. In the complex and highly liquid interest rate derivatives market, the requirements for model accuracy and realism are inordinately demanding, so it is fortunate for practitioners and academics alike that two of the industry's leading practitioners have decided to share their model building experiences. Their unusual collaboration is the culmination of decades of toil, tears, sweat, and work in the trenches. I highly recommend this book for anybody interested in how interest rate models really work."

Peter Carr, Global Head of Market Modeling, Morgan Stanley and Executive Director of Masters in Math Finance Program, Courant Institute, NYU

"This is a most comprehensive book on interest rate modeling and derivatives valuation. It treats in great detail topics of interest to both academicians and practitioners, from theoretical foundations and option pricing fundamentals, to specific models and instruments and their numerical implementation. I recommend it highly to all students and researchers."

Farshid Jamshidian, Part-time Professor of Applied Mathematics, Twente University

Edition details

• Publisher: Atlantic Financial Press
• Publication date: 2010
• Language: English
• ISBN 10: 0984422110
• ISBN 13: 9780984422111
• Binding: Hardcover
• Number of pages: 376