An Introduction to Modern Pricing of Interest Rate Derivatives
by Hossein Nohrouzian






Abstract
This thesis studies interest rates (even negative), interest rate derivatives and term structure of interest rates.  We review the different types of interest rates and go through the evaluation of a derivative using risk-neutral and forward-neutral methods.  Moreover, the construction of interest rate models (term-structure models), pricing of bonds and interest rate dervivatives, using both equilbrium and non-arbitrage approaches are discussed, compared and contrasted.  Further, we look at the HJM framework and the LMM model to evaluate and simulate forward curves and find the forward rates as the discount factors.  Finally, the new framework (fater financial crisis in 2008), under the collateral agreement (CSA) has been taken into consideration.