The role of LIBOR in interest rate swaps and other financial derivatives is to be the effective "riskless" rate, based on the premise that while banks that could borrow in the market at LIBOR flat were not completely risk-free, the rate corresponded to a high ...
however, that for reasonable estimates of the recovery rate, the value of a credit swap is relatively insensitive to the recovery rate assump- tion. They also argue that the assumption that interest rates, recovery rates, and default probabilities are independent is not very restrictive. Finally,...
A Simple Model for Pricing Securities with Equity, Interest-Rate, and Default Risk The model is extensible to handling correlated default risk and may be used to value distressed convertible bonds, debt-equity swaps, and credit portfolio ... SR Das,RK Sundaram - 《Social Science Electronic Publi...
There are options on interest rate swaps, referred to as swaptions. There are two types of swaps: a pay fixed swaption and a received fixed swaption. As the name implies, the former swaption entitles the option buyer to enter into an interest rate swap in which the buyer of the option ...
The financial crisis of 2007-09 precipitated a significant change in the practice of interest rate swap valuation. Going from traditional LIBOR to OIS (overnighdoi:10.2139/ssrn.2036979Donald J. SmithSocial Science Electronic PublishingSmith, Don (2013), "Valuing Interest Rate Swaps Using OIS ...
interest rate swapsbond futuresinterest rateexchange-tradecredit derivativeSummary The use of interest rate derivatives and credit derivatives has grown at a staggering pace over the past decade. Used by virtually all market participants, from large corporations to universal banks to hedge funds, these...
It notes that LCH.Clearnet Group Ltd. is planning to change the way it computes the present value of its cleared interest rate swap portfolios. It claims that the move emerges from efforts of major market participants on reviewing their own pricing methodologies.WhittallChristopher...
Interest-rate derivativesaffine modelsFourier space-time steppingaccrual swapsrange notesMulti-factor interest-rate models are widely used. Contingent claims with early exercise features are often valued by resorting to trees, finite-difference schemes and Monte Carlo simulations. When jumps are present, ...
affine modelsfourier space time-steppingaccrual swapsrange notesMulti-factor interest-rate models are widely used. Contingent claims with early-exercise features are often valued by resorting to trees, finite-difference schedoi:10.2139/ssrn.1562638Jaimungal, SebastianSurkov, Vladimir...
In addition to this, the chapter also discusses how the pdf of the underlying movements in stock price can be adapted to value options on other underlyings (e.g. currencies, commodity prices, interest rate swaps, forward-rate agreements)....