Aspects of a Mean-Field Market Model

In this talk we will present practical aspects of a mean-field extension of the classical LIBOR Market model and discuss its adaption to cover so-called backward-looking rates. The primary intention of the mean-field formulation is to defuse the "blow-up or explosion problem" which frequently appears when valuing long term insurance products by means of Monte Carlo simulations. The calibration of such general models can be done in an iterative way - mimicking its existence proof. Fortunately, if the involved SDE coefficients only depend of the solution’s distribution via its moments, things simplify and the model with its benefits can be applied in a straightforward way. Since classical LIBOR rates do not exist anymore - EURIBOR still does, we need to extend our approach for dealing with current needs.