A semi-analytical approach to Canary swaptions in HJM one-factor model

Marc Henrard ()

Finance from University Library of Munich, Germany

Abstract: Leveraging the explicit formula for European swaptions and coupon-bond options in HJM one-factor model, we develop a semi-explicit formula for 2-Bermudan options (also called Canary options). We first extend the European swaption formula to future times. We are able to reduce the valuation of a 2-Bermudan swaption to a single numerical integration at the first expiry date. In that integration the most complex part of the valuation of the embedded European swaptions has been simplified in such a way that it has to be performed only once and not for every point.

Keywords: Bermudan option; swaption; bond option; HJM model; one-factor model; explicit formula; numerical integration. (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2003-10-08, Revised 2004-11-25
New Economics Papers: this item is included in nep-cfn and nep-cmp
Note: Type of Document - LaTeX; prepared on Linux; to print on HP;
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0310/0310008.pdf (application/pdf)

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:wpa:wuwpfi:0310008

Access Statistics for this paper

More papers in Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).