Interest Rate Swaptions: A Review and Derivation of Swaption Pricing Formulae
In this paper we outline the European interest rate swaption pricing formula from first principles using the Martingale Representation Theorem and the annuity measure. This leads to an expression that allows us to apply the generalized Black-Scholes result. We show that a swaption pricing formula is...
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| Format: | Article |
| Language: | English |
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Tripal Publishing House
2018-02-01
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| Series: | Journal of Economics and Financial Analysis |
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| Online Access: | https://ojs.tripaledu.com/index.php/jefa/article/view/38 |