Valuation of CMS Spread Options with Nonzero Strike Rates in the LIBOR Market Model

NCUIR > School of Management at National Central University > Department of Finance > journal & Dissertation > Item 987654321/51729

Please use this identifier to cite or link to this item: http://ir.lib.ncu.edu.tw/handle/987654321/51729

Title:	Valuation of CMS Spread Options with Nonzero Strike Rates in the LIBOR Market Model
Authors:	Wu,TP;Chen,SN
Contributors:	財務金融學系
Keywords:	TERM STRUCTURE;EQUITY SWAPS
Date:	2011
Issue Date:	2012-03-27 19:03:42 (UTC+8)
Publisher:	國立中央大學
Abstract:	The main purpose of this article is to provide an approximate general pricing formula for CMS spread options that can handle the case of nonzero strike rates. A generalized lognormal distribution is used to approximate the distribution of the difference between. two CMS rates. Pricing models for CMS spread options with nonzero strike rates are then derived under the multifactor LIBOR market model and also shown to be analytically tractable for practical implementation. The models are shown to be robustly accurate in comparison with Monte Carlo simulation.
Relation:	JOURNAL OF DERIVATIVES
Appears in Collections:	[Department of Finance] journal & Dissertation

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