Design Structure - 2023.2 English

Vitis Libraries

Release Date
2023.2 English

For a given tenor structure \(T_0,T_1,...,T_n\) evenly spaced with \(\tau = T_{i+1} - T_i, \forall i=1,...,n\), and a number of factors \(F\), we evolve the LIBOR rates for all \(n\) maturities with the following stochastic equation:


Where \(\sigma_i(t)\) are calibrated volatilities, \(dW_i\) is a Brownian motion scaled by the pseudo-sqrt of the correlations matrix and \(\mu_i(t)\) is the drift defined in terms of the volatilities and correlations between tenors: