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ntruwant
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Posts: 121
Joined: August 3rd, 2004, 9:50 am

transition risk neutral world to real world in LMM

April 21st, 2010, 12:41 pm

HiIs there a good reference or can anyone comment on the transition from the risk neutral world to the real world in a standard Libor Market Model ?
 
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mj
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Joined: December 20th, 2001, 12:32 pm

transition risk neutral world to real world in LMM

April 22nd, 2010, 5:28 am

to be honest , no one worries about the real-world measure in this model. You just write down the equations in the martingale measure.
 
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ntruwant
Topic Author
Posts: 121
Joined: August 3rd, 2004, 9:50 am

transition risk neutral world to real world in LMM

April 22nd, 2010, 10:49 am

thanks mj!But in an Asset&Liability Model (ALM) I need both: isn't there a way to switch between the two worlds with a market price of risk or something else?
 
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iuliny
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Joined: July 1st, 2008, 12:58 pm
Location: New York

transition risk neutral world to real world in LMM

April 22nd, 2010, 10:50 am

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