Universiteit Utrecht

Department of Mathematics


Abstract


The BGM model
Igor Grubisic, October 9, 2002

The aim of this talk is to give the clear presentation of calibration of multi-dimensional BGM Market Model, focusing on calibration to historical correlation matrix, in most general setting. The key idea lies in the Projection Theorem, known form Functional Analysis, which provides clear explanation of what is meant by nearness of a matrix and method of finding the nearest correlation matrix. As an illustration, this calibration method is applied to price ratchets and will be compared with most common method of calibration to correlation matrix, namely PCA, used by most people working with BGM.


Back to the history of the seminar or the Colloquium Stochastiek homepage.
Martijn Pistorius (pistorius@math.uu.nl)