How to generate Foward LIBOR Rate path

jaccker · February 6th, 2005, 11:35 pm

who can tell me how to generate Libor rate path under the libor market model?

DutchQuant · February 7th, 2005, 8:38 am

Very rough overview:First determine the numeraire you want to use.Then determine the drift term (and the volatility, but in first instance you might want to use a determinstic volatility).Then generate the Brownian motion.Then you should be able to generate the paths for the forward rates.

mutley · March 7th, 2005, 3:34 pm

Apologies for semi-hijacking this thread, but how could one introduce a mean-reversion aspect to the evolution?i.e. I don't want to see some of the evolutions moving off to 10000% for a 70 time period run, or ducking down under 0% for that matter.Does anyone know of any good papers on this subject?Many thanks, James

bjeevankumar · May 6th, 2008, 9:46 am

can someone briefly explain the discretization part of libor rates with 3 factor Model??I am working on one year libor rates for 10 years.