We present four new methods for approximating the drift in the LIBOR market model. These are compared to a variety of existing methods including PPR, Glasserman-Zhao and predictor-corrector. We see that two of them which use correlation adjustments to better approximate the drift are more...

We develop a completely new model for correlation of credit defaults based on a financially intuitive concept of business time similar to that in the Variance Gamma model for stock price evolution. Solving a simple equation calibrates each name to its credit spread curve and we show that the...