Forward interest rate scenarios

allstar · February 15th, 2008, 4:02 pm

Hi All, How can I give out projection for several different interest rate scenarios for the next 10 years with given probability based on today's market information? Any idea is greatly appreciated!

Gmike2000 · February 16th, 2008, 9:16 am

If you have a BGM implementation that calibrates to implied correlations, you can infer the implied probablity of any scenario you can come up with based on that. I mention BGM because if you have it, it is the most convenient way to get a correlation matrix of the forwards. Any implied correlation matrix will do of course.