On the valuation of constant maturity swaps

Tetsuya Noguchi ()
Additional contact information
Tetsuya Noguchi: Global Analytics, Lloyds TSB Financial Markets

No 512, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: This research aims to develop a valuation technique for constant maturity swaps (CMS) based on convexity corrections. We explicitly incorporates into our valuation model both 1) complex shift patterns of the yield curve and 2) implied volatility smile and skew effects. The method requires numerically integrating an infinite string of European swaptions across all strikes induced by the stochastic volatility model calibrated to the market. Numerical experiments demonstrate validity and instrumentality of our proposed method

Keywords: Constant maturity swaps (CMS); Convexity corrections; Smile and skew effects; Non parallel shifts of yield curve; Numerical integration; Stochastic volatility model; Calibration (search for similar items in EconPapers)
Date: 2006-07-04
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:512

Access Statistics for this paper

More papers in Computing in Economics and Finance 2006 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().