Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.physa.2011.08.021
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dc.titleSimulation of nonlinear interest rates in quantum finance: Libor Market Model
dc.contributor.authorBaaquie, B.E.
dc.contributor.authorTang, P.
dc.date.accessioned2014-10-16T09:41:01Z
dc.date.available2014-10-16T09:41:01Z
dc.date.issued2012-02-15
dc.identifier.citationBaaquie, B.E., Tang, P. (2012-02-15). Simulation of nonlinear interest rates in quantum finance: Libor Market Model. Physica A: Statistical Mechanics and its Applications 391 (4) : 1287-1308. ScholarBank@NUS Repository. https://doi.org/10.1016/j.physa.2011.08.021
dc.identifier.issn03784371
dc.identifier.urihttp://scholarbank.nus.edu.sg/handle/10635/97931
dc.description.abstractThe simulation of the Libor Market Model (LMM) is extensively studied in the framework of quantum finance. The imperfectly correlated Libor rates are simulated based on a Gaussian quantum field and a recursion equation of nontrivial stochastic drift. The Libor options are studied using both the simulation method and the analytical formula. The caplet price of simulation is compared with Black's caplet formula which can be exactly derived from the LMM. The invariance of caplet price for different forward bond numeraire is verified by using the simulation. The simulation results for coupon bond options and swaptions are compared with the approximate price, which are limited for the reason that the approximate price is derived using the small volatility expansion. The simulation method is shown to have great potential in the application of pricing interest rate instruments. © 2011 Elsevier B.V. All rights reserved.
dc.description.urihttp://libproxy1.nus.edu.sg/login?url=http://dx.doi.org/10.1016/j.physa.2011.08.021
dc.sourceScopus
dc.subjectCaplet
dc.subjectCoupon bond options
dc.subjectLibor Market Model
dc.subjectMonte Carlo simulation
dc.subjectQuantum finance
dc.subjectSwaptions
dc.typeArticle
dc.contributor.departmentPHYSICS
dc.description.doi10.1016/j.physa.2011.08.021
dc.description.sourcetitlePhysica A: Statistical Mechanics and its Applications
dc.description.volume391
dc.description.issue4
dc.description.page1287-1308
dc.description.codenPHYAD
dc.identifier.isiut000300459700037
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