Asset pricing theory and the LIBOR market model

Ramsfjell, Jermund
Master thesis
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http://hdl.handle.net/11250/169173
Date
2008
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Abstract
The first part of this thesis is a general presentation of no-arbitrage asset

pricing theory in continuous time. The standard mathematical formulations

of models with Brownian motion as random variables is presented, as well as

the two approaches of partial dierential equations and martingale methods.

The second part narrows in on a particular application of this theory: The

market models of interest rates. The LIBOR and swap market model are

presented together with limitations on extension to multiple currencies.