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- 7/27/18
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In most of the textbooks, the SDE of the underlying asset is given and then using PDE or MC to get the option price. But few of them talked about how to calibrate the parameters to the market and what instruments should be used to do that.
For example, for the Hull-White model, we need interest rate cap\floor to get the mean reversion speed and volatility. Another example should be used cap and swaption to calibrate the Libor Market Model. But I have never got an idea of how to calibrate a general model.
I am wondering if there is a book covering the topic and show a map from the model to the corresponding instruments.
I really appreciate if anyone can help!
For example, for the Hull-White model, we need interest rate cap\floor to get the mean reversion speed and volatility. Another example should be used cap and swaption to calibrate the Libor Market Model. But I have never got an idea of how to calibrate a general model.
I am wondering if there is a book covering the topic and show a map from the model to the corresponding instruments.
I really appreciate if anyone can help!
