Belomestny, Denis Matthew, Stanley Schoenmakers, John G. M.
Year of Publication:
SFB 649 Discussion Paper No. 2007,067
In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to implement.