First, we give a definition of the LIBOR market model, following Jamshidian (1997). Next, we define the LIBOR market model under the real-world measure (hereinafter, LMRW), and show, following the method of Yasuoka (2013b), that the model exists. Additionally we find the models under the spot LIBOR measure and under a forward measure that are implied by the LMRW.
Finally, we verify the numerical differences of the LIBOR process according to choice of measure. The study on the real-world model will be developed in Chapter 9.
Total Pages: 91-110 (20)
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