Examples.Libor
Class LogNormalLibor

java.lang.Object
  extended byExamples.Libor.LogNormalLibor

public class LogNormalLibor
extends java.lang.Object

Computes histograms of the errors with which the log-normal approximations L0_j(T_j) and L1_j(T_j) approximate true Libor L_j(T_j). Simulations show that the approximations can be much larger than true Libor with a very small probability. In other words the errors

err0:=L_j(T_j)-L0_j(T_j) and err1:=L_j(T_j)-L1_j(T_j)

can assume very large negative values (with small probability). If these values were displayed resolution of the display of the histogram would suffer. Thus we cut the values off at the low and and compute histograms of the random variables

D0:=max{err0,-0.02} and D1:=max{err1,-0.02}

The outliers below then show up as a point mass at -0.02. All Libors are initialized at L_j(0)=0.04 with annulaized volatilities of about 0.39.


Constructor Summary
LogNormalLibor()
           
 
Method Summary
static void main(java.lang.String[] args)
           
 
Methods inherited from class java.lang.Object
clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait
 

Constructor Detail

LogNormalLibor

public LogNormalLibor()
Method Detail

main

public static void main(java.lang.String[] args)