Description

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Containing many results that are new, or which exist only in recent research articles, Interest Rate Modeling: Theory and Practice, 2nd Edition portrays the theory of interest rate modeling as a three-dimensional object of finance, mathematics, and computation. It introduces all models with financial-economical justifications, develops options along the martingale approach, and handles option evaluations with precise numerical methods.

Features

Presents a complete cycle of model construction and applications, showing readers how to build and use models

Provides a systematic treatment of intriguing industrial issues, such as volatility and correlation adjustments

Contains exercise sets and a number of examples, with many based on real market data

Includes comments on cutting-edge research, such as volatility-smile, positive interest-rate models, and convexity adjustment

New to the 2nd edition: volatility smile modeling; a new paradigm for inflation derivatives modeling; an extended market model for credit derivatives; a dual-curved model for the post-crisis interest-rate derivatives markets; and an elegant framework for the xVA.

About the Author

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Lixin Wu is a professor at the Hong Kong University of Science and Technology. Best known in the financial engineering community for his work on market models, Dr. Wu co-developed the PDE model for soft barrier options and the finite-state Markov model for credit contagion.