We introduce a new arbitrage-free interpolation scheme for the displaced-diffusion LIBOR market model. Using this new extension, and the Piterbarg interpolation scheme, we study the simulation of range accrual coupons when valuing callable range accruals in the displaced-diffusion LIBOR market...

The pricing of snowball notes in the full-factor LIBOR market model is considered. The primary aspect of the problem considered is the early exercise feature, and it is shown how to characterize a class of sub-optimal points of exercise. By combining this characterization with least-squares...