New LIBOR model simplifies financial calculations and enhances market predictability.
The article introduces a new method for modeling LIBOR rates called affine LIBOR models. These models ensure that LIBOR rates are always positive and can be easily calculated. They also allow for straightforward evaluation of complex multi-LIBOR payoffs. The researchers demonstrate the effectiveness of their approach with examples and show how it can be used to value financial instruments like caps and swaptions.