Tid: 29 november 1999 kl 1515-1600

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Maria Jansson

Titel: Pricing of interest rate derivatives using a three factor Brace-Gatarek-Musiela model. (Examensarbete)


The objective of this thesis is to implement and calibrate a three factor Brace-Gatarek-Musiela model for pricing the interest rate derivatives: caps, European and Bermudan swaptions.

The first part of the thesis focuses on the theory behind pricing derivatives, then the BGM model is presented and compared with other rate models. The BGM model is calibrated against the market, using market prices of caps and swaptions and historical data for the correlation between various segments of the swap curve. Lastly analytical prices are calculated for caps. The swaption prices are calculated via Monte Carlo simulations.

A three factor model contains enough degrees of freedom to account for the correlations between LIBOR rates and is therefore well suited for pricing European and Bermudan swaptions.

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