My favorites:"Interest Rate Models: Theory and Practice" by Brigo and Mercurio"A Practitioner's Guide to Pricing and Hedging Callable Libor Exotics in Forward Libor Models" by Piterbarg

<t>thanks all for your replies. much appreciated.the reason i asked this question is that i want to calibrate LMM (nothing to take into account smile) to caplets and in the references I've seen (Jaeckel, Brigo & Mercurio) they calibrate to ATM caplets. However, they just list a series of ATM cap...

Are ATM caplet vols quoted in the market? Can they be calculated from ATM cap vols? It's not clear to me how to do bootstrapping to calculate ATM caplet vols given a series of ATM cap vols. Thanks

What type of instruments are best suited for 2 factor short rate models (two factors in a single currency)? Maybe something like a CMS swaption? Based on the type of instrument, how does one decide if 1 factor is ok or if more are needed? Thanks in advance for any comments or opinions.

Val,Thanks for the suggestion, I'll take a look into it. What does ADI stand for?

<t>Hello all,I was wondering if people would share their thoughts on implementing trinomial (or binomial) trees for the two factor Hull-White model. In particular, I'd like to know how people deal with negative probabilities. In practice, are people satisified with the simple adjustment method propo...

Val,Can you provide more info about these papers? title? journal? thanks

I'd also like to know more about asymtotic applications. Pat, I PM'd you.