The pricing and hedging of index amortizing rate swaps

Julia D. Fernald

Quarterly Review, 1993, vol. 18, issue Win, 71-74

Abstract: Index amortizing rate (IAR) swaps have proved difficult to price because of the complexity of their embedded options. Since these options depend on the path of interest rates, pricing requires a model of interest rate movements. This article uses a simple interest rate model to illustrate the pricing and hedging of an IAR swap.

Keywords: Swaps (Finance); options; Interest rates (search for similar items in EconPapers)
Date: 1993
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