Combining the SABR and LMM models

I

The BGM model is a special version of the Libor market model (LMM), in which all forward rates are lognormal. While the LMM is a very flexible framework as it enables us to specify an individual dynamics for each Libor, the calibration of swaption smiles is difficult as, even in the simple case of lognormal forward rates, swaption prices are not known analytically and straight Monte Carlo calibration is too time-consuming.

In such a model, the instantaneous variance of a swap rate is a weighted

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

If you already have an account, please sign in here.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: