back to Damiano Brigo’s professional page. Interest Rate Models: Theory and Practice – With Smile, Inflation and Credit. (, 2nd Ed. ) by Damiano Brigo. Basic concepts of stochastic modeling in interest rate theory, As a standard reference on interest rate theory I recommend. [Brigo and Mercurio()]. The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably.

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Advanced undergraduate students, graduate students and researchers should benefit as well from seeing how some sophisticated mathematics can be used in concrete financial problems. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into tate new chapters.

Account Options Sign in. The authors’ applied background allows for numerous comments on why certain models have or have not made it in practice.

SotoNatalia A. A special focus here is devoted to the pricing of inflation-linked derivatives. In Mathematical Reviews, d. From one side, the authors would like to help quantitative analysts and advanced traders handle interest-rate derivatives with a sound theoretical apparatus.

Interest Rate Models – Theory and Practice by Mercurio, Damiano Brigo; Fabio

Moreover, the book can help academics develop a feeling for the practical problems in the market that can be solved with the use of relatively advanced tools of mathematics and stochastic calculus in particular. New chapters on local-volatility dynamics, and on stochastic volatility models have been added, with intterest thorough treatment of the recently developed uncertain-volatility approach.


Interest Rate Models – Theory and Practice: Selected pages Title Page. Extended table of contentswhere the extended table of contents is available.

Damiano Brigo (Author of Interest Rate Models – Theory and Practice)

Account Options Sign in. It perfectly combines mathematical depth, historical perspective and practical relevance. Examples of calibrations to real market data are now considered. Therefore, this book aims both at explaining rigorously how models work in theory and at suggesting interesst to implement them for concrete pricing.

Praise for the Second edition. This is the publisher web site.

A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent brlgo -volatility interpolation technique has been introduced.

The fact that the authors combine a strong mathematical finance background with expert practice knowledge they both work in a bank contributes hugely to its format. Interest Rqte Models – Theory and Practice. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs.

A clear benefit of the approach presented in this book is that practice can help to appreciate theory thus generating a feedback that is one of the most intriguing aspects of modeling and more generally of scientific investigation.

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It is true that every month a new book on financial modeling or on mathematical finance comes out, but this is a rat one. Damiano BrigoFabio Mercurio. This is a very detailed course on interest rate models.

Thus the book can help quantitative analysts and advanced traders price and hedge interest-rate derivatives with a sound theoretical apparatus, explaining which models can be used in practice for some major concrete problems. This is an area that is rarely covered by books on mathematical finance. Sample text from the book prefacefeaturing a description by chapter.

Interest Rate Models – Theory and Practice

This simultaneous attention to theory and practice is difficult to find in other available literature. The fast-growing interest for hybrid products has led to a new chapter. International Statistical Institute short book reviews. The theory is interwoven with detailed numerical examples.

The three final new chapters of this second edition are devoted to credit.

The fast-growing interest for hybrid products has led to new chapters. Dynamic Term Structure Modeling: Points of Interest, book review for Risk Magazine, November