A quadratic volatility Cheyette model

A quadratic volatility Cheyette model

market volatility

The Libor market model either in its lognormal or extended stochastic volatility version as described in Piterbarg (2003) is a standard tool in almost all financial institutions. Whether used as a risk management model or solely for benchmarking purposes, it boasts substantial advantages such as intuitive primary variables, that is, the forward rates, simplicity of calibration through analytical swaption price approximations and straightforward Monte Carlo implementation. However, it has

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