Interest Rate Modelling after the Financial Crisis

  • ID: 2566679
  • June 2013
  • Incisive Media
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Typically literature on the subject of interest rate modelling is based on the assumption of risk-free interest rate markets. Clearly this assumption no longer holds water. As a consequence of the crisis, market participants have been alerted to risk factors which had previously been neglected. This knowledge has led to important changes in the patterns of market data and to new approaches in interest rate modelling.

As interest rate markets continue to innovate and expand in this new landscape, it is becoming increasingly important to remain up-to-date with the latest practical and theoretical developments. In Interest Rate Modelling after the Financial Crisis, Massimo Morini and Marco Bianchetti address and explicate these changes, gathering the latest ideas on post-crisis market modelling and applying new methods to market data and market practice.

In response to the financial crisis, a plethora of new research appeared which attempted to understand, incorporate, and delineate the most significant changes observed in the market. Editors Massimo Morini and Marco Bianchetti have both experienced first-hand how market patterns and consequently trading practices have evolved.


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Part I: Interest Rate Markets Across the Crunch

1: Evolution of the Markets after the Credit Crunch
Marco Bianchetti and Mattia Carlicchi
Banca Intesa Sanpaolo

2: Solving the Puzzle in the Interest Rate Market
Massimo Morini
Banca IMI, Milan

Part II: Modern Pricing of Interest Rate Derivatives

3: Modern Pricing of Interest Rate Derivatives including Funding and Collateral
Marco Bianchetti
Banca Intesa Sanpaolo

4: Bootstrapping the Illiquidity: Multiple Yield Curves Construction for Market Coherent Discount and FRA Rates Estimation
Ferdinando M. Ametrano; Marco Bianchetti
Banca IMI; Banca Intesa Sanpaolo

5: Irony in Derivative Discounting: After the Crisis
Marc Henrard

6: Interest Rate Modelling under Full Collateralisation
Masaaki Fujii and Akihiko Takahashi
Graduate School of Economics, The University of Tokyo

7: Building Curves on a Good Basis
Messaoud Chibane, Japrakash Selvaraj; Guy Sheldon
Shinsei Bank Limited; ANZ Banking Corporation

Part III: New Interest Rate Models

8: Libor Market Models with Stochastic Basis
Fabio Mercurio
Bloomberg LP

9: Calibration, Simulation and Hedging in a Heston Libor Market Model with Stochastic Basis
Ahsan Amin
Infiniti Derivatives

10: Parsimonious Multi-Curve HJM Modelling with Stochastic Volatility
Nicola Moreni, Andrea Pallavicini
Banca IMI

11: Multi-Curve Low Dimensional Markovian Models in a HJM Framework
Manuel Torrealba Palacios

12: Short Rate Models with Stochastic Basis and Smile
Chris Kenyon
Lloyds Banking Group

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Massimo Morini is currently Head of Interest Rates, Credit and Inflation Models at Banca IMI Intesa San Paolo (where he is also responsible for coordinating Model Research). Massimo is a Professor of Fixed Income at Bocconi University and was Research Fellow at Cass Business School of City University, London. He holds a PhD in Mathematics and an MSc in Economics.

Massimo regularly delivers advanced training on credit modelling, interest rate market models, correlation modelling and model risk. He has led workshops on financial modelling and the credit crunch in the main international finance conferences. His papers have appeared in Risk Magazine, Mathematical Finance, the Journal of Derivatives and the Journal of Applied Mathematical Finance.

Marco Bianchetti is Senior Quantitative Analyst in the Market Risk Management, Pricing and Financial Modelling area of Banca Intesa San Paolo, Italy. His recent work focuses on model validation, model risk monitoring and on the pricing and risk analysis of interest rate and inflation derivatives. Previously he worked for six years in the front-office financial engineering area of Banca Caboto (now Banca IMI), developing pricing models and applications for fixed income trading desks. He holds an MSc and a PhD in theoretical physics from the University of Milan.

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Note: Product cover images may vary from those shown




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