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Practitioner's Course: Introduction to Interest Rate Curves and the LIBOR Market Model

Theory, Modeling and Implementation. (March 7, 8, 14 and 15)

07.03.2013 – 15.03.2013

THIS COURSE IS NOW SOLD OUT!
(future courses will be announced)

Dates and Location

Lectures

Thursday March 7th, 2013 14:00-17:30 and Friday March 8th, 2013. 08:30-17:30 (Part 1)

Thursday March 14th, 2013 14:00-17:30 and Friday March 15th, 2013. 08:30-17:30 (Part 2)

Venue

LMU München, Mathematisches Institut, Raum B 121, Theresienstraße 39 (B).

Agenda (Tentative)

Part 1: Foundations, Single-Curve and Multi-Curve Interest Rate Theory

      1. Risk Neutral Valuation: A Review
        • Foundations from Probability Theory
        • Stochastic Processes
        • Brownian Motion
        • Geometric Brownian Motion
        • Ito Calculus
        • Replication
        • Change of Measure, Risk Neutral Measure
        • Black-Scholes Model and Monte-Carlo Simulation
      2. Interest Rates (Single Curve Interest Rates Theory)
        • Zero Coupon Bonds
        • Forward Rates
      3. Simple Interest Rates Products: Linear Products (Single Curve Interest Rates Theory)
        • Swaps
        • Swap Rates
      4. Simple Interest Rates Products: European Options (Single Curve Interest Rates Theory)
        • Caplets, Cap
        • Swaptions
      5. Collateralization, Funding and Basis-Spreads (Multi-Curve Interest Rates Theory)
        • Collateralization and Funding
        • Cross-Currency Analogy to Collateralization
      6. Curve Calibration (with object oriented implementation)
        • Discount Factors and Forwards
        • Swaptions
        The resources for this session (spreadsheet, source code) are available at 

www.finmath.net/topics/curvecalibration

      .

Part 2: LIBOR Market Model: Theory and Implementation

  1. LIBOR Market Model: Definition, Drift, Model Parameters (Single Curve Interest Rate Theory)
    • Motivation of the model.
    • LMM dynamic under spot and terminal measure.
    • Model parameters (intuition).
  2. LIBOR Market Model: Calibration (Single Curve Interest Rate Theory)
    • Calibration to forward rate curve.
    • Calibration to caplets.
    • Calibration to swaptions.
  3. Cross-Currency and Hybrid LIBOR Market Model
    • Motivation.
    • CCY LMM dynamic under spot and terminal measure.
    • Equity Hybrid LMM dynamic under spot and terminal measure.
    • Multi-Curve LMM.
    • Calibration.
  4. Discretization and Monte-Carlo Simulation
    • Monte-Carlo Simulation
    • Euler-Scheme
  5. Object Oriented Implementation
    • Object oriented implementation of a Monte-Carlo Simulation of the LMM
    • Calibration example (calibration to swaptions)
    The resources for this session (spreadsheet, source code) are available at www.finmath.net/topics/libormarketmodel.
  6. Valuation of Bermudan Option
    • Object oriented implementation of a Monte-Carlo Simulation of the LMM
    • Calibration example (calibration to swaptions)

Updates

If you like to receive updates via mail, please write to email@christian-fries.de.

Detailed Timetable

  • Thursday 07.03.2013
    • 14:00-15:30 Session 1
    • 16:00-17:30 Session 2
  • Friday 08.03.2013
    • 08:30-10:00 Session 3
    • 10:30-12:00 Session 4
    • 14:00-15:30 Session 5
    • 16:00-17:30 Session 6
  • Thursday 14.03.2013
    • 14:00-15:30 Session 7
    • 16:00-17:30 Session 8
  • Friday 15.03.2013
    • 08:30-10:00 Session 9
    • 10:30-12:00 Session 10
    • 14:00-15:30 Session 11
    • 16:00-17:30 Session 12

Workshop Fee and Registration

To register for the workshop a workshop fee is requested:

  • 400 Euro a single week (part 1 or part 2).
  • 700 Euro for two weeks (part 1 and part 2).

For registration please contact Christina Broza via sekrfin@math.lmu.de.

Note: The workshop is offered at a competitive price and will not include any catering (coffee, tea, lunch or dinner). However, located in Munich's "Maxvorstadt", corresponding locations are in short walking distance from the venue.

Literature

Fries, Christian: Mathematical Finance. Theory, Modeling, Implementation. Wiley 2007. ISBN 0-470-04722-4.

Contact

email@christian-fries.de