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題名 Valuation of callable range accrual linked to CMS Spread under generalized swap market model
作者 林士貴; 何杰操
Lin, Shih-Kuei;He, Jie-Cao;Hsieh, Chang-Chieh;Huang, Zi-Wei
貢獻者 金融系
關鍵詞 Interest rate derivatives; Constant maturity swap; Range accrual; Generalized swap market model; Least square Monte Carlo method
日期 2023-11
上傳時間 29-一月-2024 09:11:52 (UTC+8)
摘要 In this paper, we price a widely-used financial instrument, the callable range accrual linked to constant maturity swap (CMS) spread, with the least square Monte Carlo method (LSMC) under the generalized swap market model (GSMM). This method, based on the swap rate, does not only provide an intuitive pricing solution, but also captures the characteristics of the swap market, which helps market participants better face the challenge of the London interbank offered rate (LIBOR) phase-out. By choosing the prices valued by the two-factor Hull–White model in Bloomberg as a benchmark, our method provides an accurate result, following the economic intuitions. Last but not least, we examine the impacts from the shifting of the yield curve and volatility term structure by sensitivity analysis. We find that the price positively correlates with the volatility term structure among 1% shifts, while the relationship can be uncertain in larger shifts. The changes in the estimated parameters, such as the yield curve and volatility term structure, might reflect the occurrences of macroeconomic events, such as the COVID-19 pandemic.
關聯 International Review of Financial Analysis, Vol.90, 102956
資料類型 article
DOI https://doi.org/10.1016/j.irfa.2023.102956
dc.contributor 金融系-
dc.creator (作者) 林士貴; 何杰操-
dc.creator (作者) Lin, Shih-Kuei;He, Jie-Cao;Hsieh, Chang-Chieh;Huang, Zi-Wei-
dc.date (日期) 2023-11-
dc.date.accessioned 29-一月-2024 09:11:52 (UTC+8)-
dc.date.available 29-一月-2024 09:11:52 (UTC+8)-
dc.date.issued (上傳時間) 29-一月-2024 09:11:52 (UTC+8)-
dc.identifier.uri (URI) https://nccur.lib.nccu.edu.tw/handle/140.119/149406-
dc.description.abstract (摘要) In this paper, we price a widely-used financial instrument, the callable range accrual linked to constant maturity swap (CMS) spread, with the least square Monte Carlo method (LSMC) under the generalized swap market model (GSMM). This method, based on the swap rate, does not only provide an intuitive pricing solution, but also captures the characteristics of the swap market, which helps market participants better face the challenge of the London interbank offered rate (LIBOR) phase-out. By choosing the prices valued by the two-factor Hull–White model in Bloomberg as a benchmark, our method provides an accurate result, following the economic intuitions. Last but not least, we examine the impacts from the shifting of the yield curve and volatility term structure by sensitivity analysis. We find that the price positively correlates with the volatility term structure among 1% shifts, while the relationship can be uncertain in larger shifts. The changes in the estimated parameters, such as the yield curve and volatility term structure, might reflect the occurrences of macroeconomic events, such as the COVID-19 pandemic.-
dc.format.extent 106 bytes-
dc.format.mimetype text/html-
dc.relation (關聯) International Review of Financial Analysis, Vol.90, 102956-
dc.subject (關鍵詞) Interest rate derivatives; Constant maturity swap; Range accrual; Generalized swap market model; Least square Monte Carlo method-
dc.title (題名) Valuation of callable range accrual linked to CMS Spread under generalized swap market model-
dc.type (資料類型) article-
dc.identifier.doi (DOI) 10.1016/j.irfa.2023.102956-
dc.doi.uri (DOI) https://doi.org/10.1016/j.irfa.2023.102956-