The Maths in the LMM starts off quite okay until it get's to valuing Swaptions using the LMM. It's not impossible to wade through the nodes of algebraic spaghetti but is it necessary say to understand and remember the derivation of the variance of the swap rate in a multifactor LMM or to understand and remember the calibration of the p-factor LMM using principal components analysis? Should I go for it?
So far the LMM has appeared on ST6 exam papers 4 times out of 16. Two wordy questions and two algebraic. See A08 Q5 and A11 Q8 to see the kind of algebra required. I would be very surprised if they went beyond this.
