  We provide a general and flexible approach to LIBOR modeling based on the
class of affine factor processes. Our approach respects the basic economic
requirement that LIBOR rates are non-negative, and the basic requirement from
mathematical finance that LIBOR rates are analytically tractable martingales
with respect to their own forward measure. Additionally, and most importantly,
our approach also leads to analytically tractable expressions of multi-LIBOR
payoffs. This approach unifies therefore the advantages of well-known forward
price models with those of classical LIBOR rate models. Several examples are
added and prototypical volatility smiles are shown. We believe that the
CIR-process based LIBOR model might be of particular interest for applications,
since closed form valuation formulas for caps and swaptions are derived.
