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Interest Rate Models 1st Edition
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Top Customer Reviews
and the theoretical viewpoint such as the one in Musiela & Rutkowski.
The authors, themselves PhDs in quantitative finance/ applied maths, wrote this book while working as quants in an Italian bank and this first hand contact with the market gave them a
practical view on the subject which markes this book very interesting.
The book contains a "rational" catalogue of models used in practice ( as opposed to models which are impossible to implement!).
In contrast with academic books on interest rate modeling which deal with HJM formulation, there is a lot of emphasis here on LIBOR and Swap market models
(BGM -Jamshidian models) which reflects the current market practice. This is a positive point since there are not many books with details on implementing and using these "market models".
Part II: Interest rate models in practice is particularly useful because it deals with implementation and calibration which, as any practitioner knows, are important and usually delicate issues.
However calibration issues are dealt with somewhat lightly, especially recent developments on modeling cap/swaption smiles
are not included here.
This book can also be used for a graduate level/PhD course on interest rate models.
There are a lot of numerical examples in the book and mathematics is kept to the necessary level while keeping the
approach both rigorous and understandable.
Overall, it is one of the best books written on the subject.
I highly recommend it to PhD students, quants and researchers interested in this field.
I've followed a similar path from control to finance, and having worked with interest rate models, I couldn't help but order this Brigo-Mercurio book. I had high expectations 'cause these two guys are working in a bank on the real thing.
Sure enough I'm not disappointed.
1-factor models are handled with great care, a ton of formulas and recipes are given. I've never seen this kind of analysis of pricing with Gaussian 1-f models. The new upgrade of the CIR model is interesting and accurate. "CIR++" is now my favorite 1-f model. I like the treatment of lognormal 1-f models and the explanation of Monte Carlo and trees -- the flow-chart for Bermudan swaptions is crystal clear! Plots of market implied structures and volatility calibration are useful additions.
The chapter on 2-f extensions has one of the best discussions on volatility, and two tons of useful formulas/recipes. Two dimensional trees!
The HJM chapter size is OK. I agree - the useful models embedded in HJM are short rate models and market models.
Market models - these three chapters alone are worth the book. You'll find yourself nodding as you read the guided tour. They make it look easy all the time. The exposition is focused, clear, intuitive, detailed. There's also new stuff, just check the calibration discussion!Read more ›
Anyone interested in implementing the LMM/BGM/MSS model in practice is well advised to read it.
I would just say that this is certainly a must have in the field.
Most Recent Customer Reviews
A solid, widely accepted reference on fixed income modeling. Written more from an academic's than practitioner's perspective, it is nevertheless useful for someone who has a need... Read morePublished 4 months ago by Daniel C
The most useful book about complex interest rate products.
The depth and breadth of this book is impressive.
The author did a good balance between theory and practice.
I really, really like this book. Chapter 2 and chapter 6 make this book all worth buying. Especially if you take into account Brigo's own lecture notes on the homepage [... Read morePublished on September 18, 2011 by Kasper Sørensen
The modeling of interest rates is now a multi-million dollar business, and this is likely to grow in the years ahead as worries about quantitative easing, government budgets,... Read morePublished on July 6, 2011 by Dr. Lee D. Carlson
This is probably one of the best IR model books out there by the time it was published (2006-2007). The book is very complete about all the models in literature, from 1 factor... Read morePublished on December 13, 2010 by aTrader