LIBOR Market Model

The LIBOR Market Model is a financial framework used to predict future interest rates based on the London Interbank Offered Rate (LIBOR). It helps analysts and traders understand how interest rates could evolve over time, which is crucial for pricing interest rate derivatives like swaps and options. The model assumes interest rates can fluctuate randomly and incorporates factors like market conditions and economic indicators. By simulating different possible interest rate paths, it helps financial institutions manage risks and make informed investment decisions.