RT Journal Article
SR Electronic
T1 Optimal Calibration of LIBOR Market Models to Correlations
JF The Journal of Derivatives
FD Institutional Investor Journals
SP 43
OP 50
DO 10.3905/jod.2004.450967
VO 12
IS 2
A1 Weigel, Peter
YR 2004
UL http://jod.pm-research.com/content/12/2/43.abstract
AB 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