Forward LIBOR Rates Models Inferred from Cap-Price

Abstract

We construct a forward LIBOR-rates model, which is calibrated to all “implied volatility-curves of caplets” (which is assumed to be given) under a framework of Jamshidian and Musiela-Rutkowski (cf., [2-3]). Further, we suggest an algorithm of the construction starting with market datas of implied volatilities of caps.