A new approximate swaption formula in the LIBOR market model: an asymptotic expansion approach

DOI10.1080/1350486021000029216zbMath1072.91016OpenAlexW2045855334MaRDI QIDQ4449553

Atsushi Kawai

Publication date: 11 February 2004

Published in: Applied Mathematical Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/1350486021000029216

zbMATH Keywords

asymptotic expansionMonte Carlo simulationLIBOR market modelvariance reduction methodapproximate pricing formulaEuropean payer swaptionslog-normal volatility functionmodified volatility functionoption valuation problemsvolatility skews

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Interest rates, asset pricing, etc. (stochastic models) (91G30) Derivative securities (option pricing, hedging, etc.) (91G20) Auctions, bargaining, bidding and selling, and other market models (91B26)

Related Items (9)

Unifying the BGM and SABR Models: A Short Ride in Hyperbolic Geometry ⋮ Asymptotic Expansion Approach in Finance ⋮ EFFICIENT LONG-DATED SWAPTION VOLATILITY APPROXIMATION IN THE FORWARD-LIBOR MODEL ⋮ FOURIER TRANSFORM METHOD WITH AN ASYMPTOTIC EXPANSION APPROACH: AN APPLICATION TO CURRENCY OPTIONS ⋮ Basket options valuation for a local volatility jump-diffusion model with the asymptotic expansion method ⋮ An asymptotic expansion approach to currency options with a market model of interest rates under stochastic volatility processes of spot exchange rates ⋮ A HYBRID ASYMPTOTIC EXPANSION SCHEME: AN APPLICATION TO LONG-TERM CURRENCY OPTIONS ⋮ ANALYTICAL APPROXIMATION TO CONSTANT MATURITY SWAP CONVEXITY CORRECTIONS IN A MULTI-FACTOR SABR MODEL ⋮ MOMENT APPROXIMATIONS OF DISPLACED FORWARD-LIBOR RATES WITH APPLICATION TO SWAPTIONS

Cites Work

• Continuous-time term structure models: Forward measure approach
• LIBOR and swap market models and measures
• Monte Carlo methods for security pricing
• Arbitrage-free discretization of lognormal forward Libor and swap rate models
• The Asymptotic Expansion Approach to the Valuation of Interest Rate Contingent Claims
• The Market Model of Interest Rate Dynamics
• Volatility skews and extensions of the Libor market model
• Changes of numéraire, changes of probability measure and option pricing
• Unnamed Item

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