Professor Needs Advice For Model Validation Assignment

[Ken Abbott]

I'm assigning a model validation problem to a graduate class I'm teaching. I ran this function at a big bank, so I'm very familiar with the process. I have a student very interested in the swap market, so I figured a good model for him to validate will be one that takes the short rate (formerly known as LIBOR-to-first, and yes, I'm dating myself), the strip of eurodollar futures and the swap nodes to create a function that could create an arbitrage-free, continuous YC into which you'd enter the maturity of interest and get back the swap rate.

This was a standard homework problem in Wall Street training programs in the 1990s and I thought it would be a good model to dissect. (I actually did it while I was a trader, back in the day.) Is there an online site that does this calculation?

Since I'm not sniffing around model vendors since I retired, I'd also be interested in any other ideas people have for documented models (pricing or risk) that could be validated by an MS student.

Thanks

 

[CrossGamma]

Have a look at OpenGamma Strata. It's a (mostly) open source pricing and risk framework in Java. See e.g. Strata Documentation and Strata/modules/pricer/src/main/java/com/opengamma/strata/pricer/swap/DiscountingSwapLegPricer.java at main · OpenGamma/Strata. Nice thing is that it's a full-blown library and not just a toy pricer / fitter example, i.e. closer to what your students would come across in the wild.