Chapter Iv - Interest Rate Models
نویسنده
چکیده
Observe that the forward rate F (t, T0, T1) and the swap rate R(t) are known today (time t = 0) from today’s yield curve, but for t > 0 they are unknown and are therefore random variables. In order to value interest rate derivatives we need to model these random variables. To see how we might go about this we consider one of the simplest interest rate derivativesan interest rate cap on a loan. Suppose the loan is as described above, so money is borrowed at time T0 and repaid at time TN with interest rate payments at times T1, T2, .., TN . The interest rate is set at time Tj−1 for the period (Tj−1, Tj) to be L(Tj−1, Tj) where L(t, t ′) is the floating rate available at time t for borrowing at t with repayment at time t′ > t. If K is the interest rate cap then the contribution to the cost of the cap for the interest period (Tj−1, Tj) is
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تاریخ انتشار 2013