This paper presents a method for calibrating a multicurrency lognormal LIBOR Market Model to market data of at-the-money caps, swaptions and FX options. By exploiting the fact that multivariate normal distributions are invariant under orthonormal transformations, the calibration problem is...

A joint model of commodity price and interest rate risk is constructed analogously to the multi-currency LIBOR Market Model (LMM). Going beyond a simple “re-interpretation” of the multi-currency LMM, issues arising in the application of the model to actual commodity market data are...

Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performanceon long-dated commodity derivatives? To answer this question, we consider futuresprice models for commodity derivatives that allow for stochastic volatility and stochastic interestrates and a...

Based on the multi-currency LIBOR Market Model (LMM) this paper constructs a hybrid commodity interest rate market model with a time-dependent stochastic local volatility function allowing the model to simultaneously fit the implied volatility surfaces of commodity and interest rate options....

The class of forward-LIBOR market models can, under certain volatility structures, produce unrealistically high long-dated forward rates, particularly for maturities and tenors beyond the liquid market calibration instruments. This paper presents a diagnostic tool for analysing the quantiles of...

As more and more jurisdictions transition from LIBOR-type interest rate benchmarks to new riskfree rate (RFR) benchmarks based on overnight rates, such as SOFR in the US, it is important to adapt interest rate term structure models to reflect this. In particular, overnight rates are largely...