Abstract
Another case in which correlations are critical is calibration of the LIBOR market model either to a set of implied correlations from swaption prices or to a set of estimated correlations from historical rate movements. The problem is that if there are n LIBOR rates under consideration, their correlation matrix will have n dimensions. In this article, Weigel presents a simple technique to reduce the dimensionality of the problem. He shows how the ?method of alternating projections? produces the correlation matrix of rank k
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