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transition risk neutral world to real world in LMM

Posted: April 21st, 2010, 12:41 pm
by ntruwant
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 ?

transition risk neutral world to real world in LMM

Posted: April 22nd, 2010, 5:28 am
by mj
to be honest , no one worries about the real-world measure in this model. You just write down the equations in the martingale measure.

transition risk neutral world to real world in LMM

Posted: April 22nd, 2010, 10:49 am
by ntruwant
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?

transition risk neutral world to real world in LMM

Posted: April 22nd, 2010, 10:50 am
by iuliny