Fast Rank Reduction of Parametric Forward Rate Correlation Matrices
10 Pages Posted: 19 Nov 2010
Date Written: November 8, 2010
Abstract
For efficiently calibrating the correlation structure of a LIBOR market model (LMM) to market data, low-rank correlation parameterizations are necessary. In this paper we present a new simple approach for generating low-rank low-parametric forms from given full-rank parameterizations.
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