A NOTE ON THE PRICING OF INDEX AMORTISING RATE SWAPS IN A WORST-CASE SCENARIO

D. Epstein () and P. Wilmott ()
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D. Epstein: Mathematical Finance Group, OCIAM, Oxford University & CAL FP Bank, UK
P. Wilmott: Wilmott Associates, London, UK

International Journal of Theoretical and Applied Finance (IJTAF), 2002, vol. 05, issue 05, 447-454

Abstract: The index amortising rate swap is an ideal candidate for valuation under a worst-case scenario. We price this illiquid contract using a non-probabilistic interest rate with uncertain parameters and then form a static hedge using liquid, market-traded swaps, to find an optimal price.

Keywords: Amortising swaps; worst case scenario; static hedge; uncertain parameter (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0219024902001626

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