Engineering Bgm (Hardcover) (ISBN-13: 9781584889687)

Also known as the Libor market model, the Brace-Gatarek-Musiela (BGM) model is becoming an industry standard for pricing interest rate derivatives. Written by one of its developers, Engineering BGM builds progressively from simple to more sophisticated versions of the BGM model, offering a range of methods that can be programmed into production code to suit readers' requirements. After introducing the standard lognormal flat BGM model, the book focuses on the shifted/displaced diffusion version. Using this version, the author develops basic ideas about construction, change of measure, correlation, calibration, simulation, timeslicing, pricing, delta hedging, barriers, callable exotics (Bermudans), and vega hedging. Subsequent chapters address cross-economy BGM, the adaptation of the BGM model to inflation, a simple tractable stochastic volatility version of BGM, and Brazilian options suitable for BGM analysis. An appendix provides notation and an extensive array of formulae. The straightforward presentation of various BGM models in this handy book will help promote a robust, safe, and stable environment for calibrating, simulating, pricing, and hedging interest rate instruments.

Author: Alan Brace
ISBN-10: 1584889683
ISBN-13: 9781584889687
Publisher: CRC Press
Language: English
Published: 01/01/2008
Pages: 236
Format: Hardcover
Weight: 1.05lbs
Size: 9.29h x 6.55w x 0.70d

Review Citation(s):
Reference and Research Bk News 05/01/2009 pg. 87