Interest Rate Modeling

Part I: Introduction to interest rate modelling
 
1. Introduction to interest rates
 
Interest rate behaviour; Basic concepts; Interest rate markets; Historical and current data; Uses of interest rate models; Conclusion
 
2. Interest rates in history
 
Interest rates in monetary history; Characteristics of interest rate behaviour
 
3. Introduction to interest rate modelling
 
Yield curve basics; Describing interest rate processes; Introducton to interest rate models; Categories of interest rate model; The role of the short rate
 
4. Interest rate models: theory
 
Summary of valuation
 
A theoretical market framework; Fundamentals of pricing; valuing by change of numeraire; Derivatives in the extended Vasicek model
 
5. Basic modelling tools
 
Introduction to valuation; Introduction to estimation; Statistical tests; Yield curve stripping; The convexity adjustment
 
6. Densities and distributions
 
The density function; Kernel methods; Boundary behaviour; Interest rate models at extreme values of interest rates; Tail distributions
 
Part II Interest rate models
 
7. Affine models
 
Affine term structure models; Interpreting the state variables; Types of affine model; Examples of one-factor affine models; Examples of n-factor affine models; A general framework for affine models
 
8. Market models and the Heath, Jarrow and Morton framework
 
Introduction to the Heath, Jarrow and Morton model; Volatility functions in HJM; Market models; General market models
 
9. Other interest rate models
 
Consol models; Price kernet models; Positive interest rate models; Non-linear models
 
10. General formulations of interest rate models
 
Jump processes; Random field models; A general model; Jump models
 
11. Economic models
 
Economics and interest rates
 
An economically motivated financial model of interest

JESSICA JAMES is Head of Research for Bank One's Strategic Risk Management group, based in the UK. Jessica started life as a physicist at Manchester University and completed her DPhil in Theoretical Atomic and Nuclear Physics at Christ Church, Oxford, under Professor Sandars. After a year as a college lecturer at Trinity, Oxford, she began work at he First National Bank of Chicago, now Bank One, where she still works. She is well known as a speaker on the conference circuit, lecturing on a variety of topics such as VaR, capital allocation, credit derivatives and interest rate modelling, and ahs published articles on various aspects of financial modelling.
 
NICK WEBBER is a lecturer in Finance at Warwick Business School. Prior to his academic career, Nick has had extensive experience in the industrial and commercial world in operational research and computing. After obtaining a PhD in Theoretical Physics from Imperial College he began research into financial options. His main area of research centres on interest rate modelling and computational finance. He ahs taught practitioner and academic course for many years, chiefly on options and interest rates.

"Interest Rate Modelling is an encyclopedic treatment of interest rates and their related financial derivatives. It combines advanced theory with extensive and down-to-earth data analysis in a way which is truly unique. For practitioners, students and scholars in the field, this impressive wok will be the standard reference for years to come.," Professor Tomas Bjork,, Stockholm School of Economics#."..an excellent book. I am particularly pleased by its breadth and range of topics...the reader is provided with an informative and readable exposition.," Dr Farshid Jamshidian,, NetAnalytic#"I particularly like the strong emphasis on the practicalities and calibration of interest rate models. This book will be invaluable as a comprehensive reference to students, researchers, and practitioners.," Professor Francis Longstaff,, The Anderson School at UCLA#"This is a carefully written, scholarly but fascinating presentation of the field of Interest Rate Modelling. It combines the best of two worlds: the rigour expected from finance in acamedia with the relevance expected from finance in practice. James and Webber are truly masters of their market since this book is surely a must-buy for both researchers and practitioners. If only all finance books were written with this care and attention to detail.," Dr Neil Johnson,, Clarendon Laboratory, Oxford#"Today, interest rates are key economic instruments. This is a mammoth treatise and must surely rank as one of the most comprehensive available on the topic. Anyone interested in modelling or simulating the behaviour of interest rates, be they practitioner, economist, mathematician or new entrant to the subject, will find within a wealth of pertinent material.," Professor Peter Richmond,, Trinity College Dublin#

"Interest Rate Modelling is an encyclopedic treatment of interest rates and their related financial derivatives. It combines advanced theory with extensive and down-to-earth data analysis in a way which is truly unique. For practitioners, students and scholars in the field, this impressive wok will be the standard reference for years to come." (Professor Tomas Bjork, Stockholm School of Economics)

" ... an excellent book. I am particularly pleased by its breadth and range of topics ... the reader is provided with an informative and readable exposition." (Dr Farshid Jamshidian, NetAnalytic)

"I particularly like the strong emphasis on the practicalities and calibration of interest rate models. This book will be invaluable as a comprehensive reference to students, researchers, and practitioners." (Professor Francis Longstaff, The Anderson School at UCLA)

"This is a carefully written, scholarly but fascinating presentation of the field of Interest Rate Modelling. It combines the best of two worlds: the rigour expected from finance in acamedia with the relevance expected from finance in practice. James and Webber are truly masters of their market since this book is surely a must-buy for both researchers and practitioners. If only all finance books were written with this care and attention to detail." (Dr Neil Johnson, , Clarendon Laboratory, Oxford)

"Today, interest rates are key economic instruments. This is a mammoth treatise and must surely rank as one of the most comprehensive available on the topic. Anyone interested in modelling or simulating the behaviour of interest rates, be they practitioner, economist, mathematician or new entrant to the subject, will find within a wealth of pertinent material." (Professor Peter Richmond, Trinity College Dublin)