Interest Rate Modelling

By: Nick Webber, Jessica James

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Product code: 20101
ISBN: 0471975230
672 pages
Format: Hb
Published by: John Wiley & Sons, 2000

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Interest Rate Modelling - front page cover image

Description of Interest Rate Modelling

Balanced coverage of the practical use of models and their underlying theories This comprehensive guide to valuing and hedging interest rate products provides a practical as well as theoretical approach to interest rate modelling. Based upon two intensive professional seminars on interest rate modeling and yield curve estimation, this book is ideal for practitioners as well as university courses. Interest Rate Modelling includes exercises and case studies. While intended as an advanced view of a quantitative topic, mathematical concepts are introduced and explained to make this complex topic accessible to the broadest possible audience.

This volume covers developments in the interest rate markets, with descriptions and implementation techniques for all the major classes of interest rate models. It covers those models already in practice, as well as theoretical models. The major categories of interest rate models analysed include:

- Affine models
- HJM models
- market models
- Consol-based models

and lesser known types such as:

- random field models
- jump-augmented models
- price kernel/positive models
- official rate models

Implementation methods are also discussed in full, including the latest developments in the use of finite difference methods, Monte Carlo methods and lattice methods, and their particular application to the valuation of interest rate derivatives.

Interest Rate Modelling - Chapter headings

PART 1: Introduction to interest rate modelling

1. Introduction to interest rates
2. Interest rates in history
3. Introduction to interest rate modelling
4. Interest rate models: theory
5. Basic modelling tools
6. Densities and distributions

PART II: Interest rate models

7. Affine models
8. Market models and the Heath, Jarrow and Morton framework
9. Other interest rate models
10. General formulations of interest rate models
11. Economic models

PART III: Valuation methods

12. Finite difference methods
13. Valuation: the Monte Carlo method
14. Lattice methods

PART IV: Calibration and estimation

15. Modelling the yield curve
16. Principal components analysis
17. Estimation methods: GMM and ML
18. Further estimation methods
19. Interest rates and implied pricing

Afterword
Notation
Glossary of mathematical, market and model terms
References
Author Index
Subject Index

Authobiography of Nick Webber, Jessica James

Jessica James (London, England) is Vice President in the Strategic Risk Management Group of the First National Bank of Chicago. Dr. Nick Webber (Coventry, England) is a lecturer in finance at Warwick Business School, University of Warwick, Coventry.