Lecture

Interest Rate Derivatives: Calibration Example

Description

This lecture covers the calibration of interest rate models using a two-factor Gaussian HJM model to market data, including swap rates and ATM cap quotes. It explains cap pricing, caplet price formula, and the estimation of discount curves. The lecture also discusses the calibration problem, solution using vega weights, and the computation of Black and Bachelier cap vegas. The instructor demonstrates the weighted least squares calibration method and presents the fitted normal and Black implied volatility curves.

In MOOC

Instructor

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Official source

https://mediaspace.epfl.ch/media/0_93zy8hrd

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Ontological neighbourhood

Economics

Microeconomics: Financial economics

Business

Finance: Financial risk management

Statistics

Data analysis: Regression analysis

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