CMS swaps in separable one-factor Gaussian LLM and HJM model

Marc Henrard

MPRA Paper from University Library of Munich, Germany

Abstract: An approximation approach to Constant Maturity Swaps (CMS) pricing in the separable one-factor Gaussian LLM and HJM models is presented. The approximation used is a Taylor expansion on the swap rate as a function of a random variable which is intuitively similar to a (short) rate. This approach is different from the standard approach in CMS where the discounting is written as a function of the swap rate. The approximation is very efficient.

Keywords: CMS swap; LLM model; HJM model; one factor; approximation (search for similar items in EconPapers)
JEL-codes: C63 E43 G13 (search for similar items in EconPapers)
Date: 2007-05-08
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3228

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