QuoteOriginally posted by: MebilesCan you suggest any material for model calibration?
book covers the implementation and calibration of the model but doesn't include any code. It's written in a pretty clear style and is easy to follow but I think it would have been more useful with code.Here is a comment on the model from Piterbarg regarding the LMM extension he and Andersen offer in their book vs. the SABR/LMM model:QuoteOriginally posted by: Hansi@Vladimir: In chapter 14 there is a mention that the chapter provides a series of extension to the LMM in order to better capture observed volatility smiles. Any thoughts on the differences of your suggested model in comparison with the SABR/LMM promoted by Rebonato, McKay and White given that I have not had time to read through the chapter? (if you have ever looked into it that is)QuoteOriginally posted by: piterbargHiThank you for your comments. I have added a pdf of common notations to the downloads area of the book website ( here), hopefully it will be useful to you and othersas for my opinion of LMM/SABR, do not really look to start a religious war here, but my own view of LMM/SABR is rather negative as I see numerous drawbacks, e.g.1. Having a separate stochastic vol per Libor rate seems to imply that simulated shapes of yield curves would be quite weird (i.e. jagged and non-smooth)2. SABR formula does not match SABR Monte Carlo to any reasonably level of accuracy ; why not a big problem for interpolating smiles for vanillas, becomes a huge problem if you are really trying to calibrate an LMM model that is MC-based3. The accuracy of approximation formulas for swaptions looks like 5-7 years behind the corresponding formulas for LMM with (Heston) stoch vol (and this is not even considering the MC issue)If anybody disagrees feel free to start a new thread about it
For the record we spend precisely zero time on LMM/SABR in our book and if this is what you fancy, you should _NOT_ buy our bookSpeaking of buying -- Wilmott bookshop always has a good stash on hand, so they probably have the fastest turnaround time in the UK. Amazon.co.uk lists about 7-11 days delay. Unlike in the UK, Printing on demand seems much faster in the US where Amazon.com is doing a brisk trade and can turn around your order within a couple of days, judging by people's comments. Some initial reviews are also starting to appear on Amazon.com Vladimir