Interest Rate Modeling for Risk Management – Market Price of Interest Rate Risk, 2nd Edition, presents information about the application of the ‘interest rate model’ for risk management goals. When using this model to generate interest rate scenarios for the risk management, the scenarios should be generated with the real probabilities, so called the real-world measure. For this purpose, the interest rate model should be specified under the real-world measure, which is called the ‘real-world model’ in practice.
The first edition of this book introduced a theoretical framework that allows estimating the market price of interest rate risk, which is the most important key to construct the real world model. This second edition builds on the previous edition by covering new applications…
