Abstract

http://ssrn.com/abstract=291988
 
 

References (22)



 


 



Swaptions and Options


Don M. Chance


Louisiana State University, Baton Rouge - Department of Finance; Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

September 24, 2001

Virginia Tech Department of Finance Working Paper No. 01-5

Abstract:     
A swaption is a derivative contract granting the right to enter into a swap. The literature on swaptions is sparse, and only the interest rate swaption has been examined. This paper examines swaptions on equities, currencies, and commodities, exploring a variety of constructions to determine how these instruments are similar to standard options on the underlying asset. It shows that in most cases, swaptions can be shown to be equivalent to a specific quantity of options on the underlying asset. As a result, standard models for pricing options on the underlying can be used to price swaptions. In addition, this paper provides a variation of the Margrabe model for pricing exchange options in which one of the assets is a bond and the other a stock, which is appropriate for pricing equity and currency swaptions.

Number of Pages in PDF File: 28

Keywords: swaptions, options

JEL Classification: G13

working papers series


Download This Paper

Date posted: November 29, 2001  

Suggested Citation

Chance, Don M., Swaptions and Options (September 24, 2001). Virginia Tech Department of Finance Working Paper No. 01-5. Available at SSRN: http://ssrn.com/abstract=291988 or http://dx.doi.org/10.2139/ssrn.291988

Contact Information

Don M. Chance (Contact Author)
Louisiana State University, Baton Rouge - Department of Finance ( email )
2163 CEBA
Baton Rouge, LA 70803
United States
Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration
Baton Rouge, LA 70803-6308
United States
225-578-0372 (Phone)
225-578-6366 (Fax)
HOME PAGE: http://www.bus.lsu.edu/academics/finance/faculty/dchance/
Feedback to SSRN


Paper statistics
Abstract Views: 5,895
Downloads: 1,592
Download Rank: 5,206
References:  22

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.453 seconds