Negative Libor rates in the swap market model |
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| Authors: | Mark H. A. Davis Vicente Mataix-Pastor |
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| Affiliation: | (1) Department of Mathematics, Imperial College, London, SW7 2AZ, UK |
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| Abstract: | We apply Stroock and Varadhan’s support theorem to show that there is a positive probability that within the Swap Market Model the implied Libor rates become negative in finite time. Mataix-Pastor received support from the Instituto Credito Oficial (ICO), Spain, and Fundación Caja Madrid. |
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| Keywords: | Forward swap rates Forward Libor rates Support theorem |
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