Abstract
ABSTRACTIn this article, we present a methodology to simulate the evolution of interest rates under real-world probability measure. More precisely, using the multidimensional Shifted Lognormal LIBOR market model and a specification of the market price of risk vector process, we explain how to perform simulations of the real-world forward rates in the future, using the Euler‒Maruyama scheme with a predictor‒corrector strategy. The proposed methodology allows for the presence of negative interest rates as currently observed in the markets.
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