• interest rate swaps
• collar pricing
• economic scenario generator
• insurance policy
• risk management
• guaranteed minimum returns
• duration matching

The aim of this work is to show the implementation of two pricing techniques, namely Black’s formula for Caps and Floors and Monte Carlo Option Pricing. Although different, they serve the same purpose: find the costs associated to some investment strategies able to hedge the interest rate risk to which both Commercial Enterprises and Local Public Bodies are exposed to. The common theoretical framework under which they are developed is provided by the Libor Market Model.