TY - JOUR
T1 - Optimal Calibration of LIBOR Market Models to Correlations
JF - The Journal of Derivatives
SP - 43
LP - 50
DO - 10.3905/jod.2004.450967
VL - 12
IS - 2
AU - Weigel, Peter
Y1 - 2004/11/30
UR - http://jod.iijournals.com/content/12/2/43.abstract
N2 - Another case in which correlations are critical is calibration of the LIBOR market model either to a set of implied correlations from swaption prices or to a set of estimated correlations from historical rate movements. The problem is that if there are n LIBOR rates under consideration, their correlation matrix will have n dimensions. In this article, Weigel presents a simple technique to reduce the dimensionality of the problem. He shows how the ?method of alternating projections? produces the correlation matrix of rank k
ER -