Abstract

  
 

References (20)



 
 

Citations (2)



 


 



Fast and Accurate Pricing and Hedging of Long-Dated CMS Spread Options


Mark S. Joshi


University of Melbourne - Centre for Actuarial Studies

Chao Yang


University of Melbourne - Centre for Actuarial Studies
December 8, 2009


Abstract:     
We present a fast method to price and hedge CMS spread options in the displaced-diffusion co-initial swap market model. Numerical tests demonstrate that we are able to obtain sufficiently accurate prices and Greeks with computational times measured in milliseconds. Further, we find that CMS spread options are weakly dependent on the at-the-money Black implied volatility skews.

Number of Pages in PDF File: 26

Keywords: Spread option, Gaussian quadrature rule, Delta, Vega, Market skew sensitivity

JEL Classification: G13

working papers series


Download This Paper

Date posted: December 11, 2009  

Suggested Citation

Joshi, Mark S. and Yang, Chao, Fast and Accurate Pricing and Hedging of Long-Dated CMS Spread Options (December 8, 2009). Available at SSRN: http://ssrn.com/abstract=1520775 or http://dx.doi.org/10.2139/ssrn.1520775

Contact Information

Mark Joshi (Contact Author)
University of Melbourne - Centre for Actuarial Studies ( email )
Melbourne, 3010
Australia
Chao Yang
University of Melbourne - Centre for Actuarial Studies ( email )
Melbourne, 3010
Australia
Feedback to SSRN (Beta)


Paper statistics
Abstract Views: 2,257
Downloads: 989
Download Rank: 9,455
References:  20
Citations:  2

© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright
This page was processed by apollo5 in 0.407 seconds