<t>basically, you have just one asset that you can use as numeraire - the forward price. Then, of course, it is a question of how you model L(T) - depending on how liquid the market is, you may look for answers in the finance microstructure literature (as a general comment, maybe it is very liquid a...

<t>hi!i feel a bit funny answering this question, since i am not an expert on the mentioned topic or paper, but since nobody else seems to have an opinion, here is what my knowledge about GMM and IV-s tells me:a) GMM does not necessarily require IV-s when setting up, so you should have a sound theor...

from my point of view, the book of Tomas Bjork is very good and has some nice exercises.

<t>why don't you try Equity Swaps Paper?The paper extends a Wiener framework to a jump diffusion framework, it allows for marked point processes, which is quite general, and has an appendix showing how to derive some formulas by applying Ito's lemma. It is not as useful as a handbook, but it is a ni...

<t>This is a question that always comes back:what is your "prefered" interest rate model? or the most common?most used interest rate model?the amount of models presented in books is huge, yet there are few arguments clearly laid down for using one or another, so, I guess, it all comes to experience ...

But the Black Scholes model has a closed form solution. All the variables entering the solution are exogenous, so numerical analysis does not seem necessary.Maybe the model you refer to is not Black Scholes? but a variation of BS?

"The main qualitative distinction of the new pricing approach from either binomial or Black Scholes's is that it represents the option price as a stochastic process."I think you need to look in a mathfinance book - sorry to be abrupt.

<r>One possible suggestion is to use good deal bounds - you will find an interval of equivalent martingale measures, just like in the standard no-arbitrage framework, but it will yield a much tighter price interval. reference: "Towards a general theory of good deal bounds", by Bjork and Slinko; link...