The Lévy swap market model

An Application of Genetic Network Programming Model for Pricing of Basket Default Swaps (BDS)

The credit derivatives market has experienced remarkable growth over the past decade. As such, there is a growing interest in tools for pricing of the most prominent credit derivative, the credit default swap (CDS). In this paper, we propose a heuristic algorithm for pricing of basket default swaps (BDS). For this purpose, genetic network programming (GNP), which is one of the recent evolutiona...

Generalized Swap Market Model And the Valuation of Interest Rate Derivatives

In this paper we will establish a generalized Swap Market Model (GSMM) by unifying the stochastic process of swap rates with constant tenors under a single swap measure. GSMM is a natural extension of Libor Market Model (LMM) for swap rates, and LMM can be considered as a special case of GSMM since Libors is a special swap rate with the constant tenor of one period. GSMM can be applied for pric...

Modelling Australian interest rate swap spreads by mixture autoregressive conditional heteroscedastic processes

An interest rate swap is a contract between two parties to exchange periodically fixed rate payments for floating rate payments based on an agreed-upon notional principal and maturity. The fixed rate is known as the swap rate and a swap curve can be constructed using swap rates of different maturities. The swap curve is widely used by financial market participants as the benchmark for the prici...

Pricing of range accrual swap in the quantum finance Libor Market Model

Pricing CMS spreads in the Libor market model

We present two approximation methods for pricing of CMS spread options in Libor market models. Both approaches are based on approximating the underlying swap rates with lognormal processes under suitable measures. The rst method is derived straightforwardly from the Libor market model. The second one uses a convexity adjustment technique under a linear swap model assumption. A numerical study d...