Calibration and Pricing in a Multi-Factor Quadratic Gaussian Model

Samson Assefa

No 197, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: We consider a two-country multi-factor quadratic Gaussian model and provide efficient formulas for the price of default free bonds and the calibration of the model to the default free discount term structure. We also provide approximations for the price of default free swaptions in such a model indicating the limitation of using an approach based on replacing certain martingales by their expectation.

Pages: 77 pages
Date: 2007-05-01
New Economics Papers: this item is included in nep-fmk
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