Barrier swaption pricing formulae of mean-reverting model in uncertain environment

Jing Lu, Xiangfeng Yang and Miao Tian

Chaos, Solitons & Fractals, 2022, vol. 160, issue C

Abstract: Barrier swaption is an exotic option, in which the option purchaser has the right to decide whether the swaption will come into effect within a period and it becomes effective (invalid) only when the underlying rises (falls) to the barrier price. This paper studies four kinds of barrier swaptions based on the mean-reverting model, which are up-and-in payer swaption, down-and-in receiver swaption, down-and-out payer swaption, up-and-out receiver swaption, and the price calculation formulae are given. Then, the related parameters are calculated by the minimum cover estimation method. Finally, the examples are given.

Keywords: Uncertain finance; Barrier swaption; Mean-reverting model; Minimum cover estimation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:160:y:2022:i:c:s0960077922004131

DOI: 10.1016/j.chaos.2022.112203

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