Turbo Charging the Cheyette Model

12 Pages Posted: 5 Dec 2010

Date Written: June 1, 2001

Abstract

We describe a number of ideas for speeding up and improving the performance of the Cheyette (1992) yield curve model with particular attention to the pricing of Bermudan swaptions. Specifically, we present: a better skew specification, a more efficient method for pricing, closed-form approximations for calibration of the model, and a new idea for calibrating the speed of mean-reversion.

Keywords: Markovian HJM Models, Bermudan Swaption Pricing

JEL Classification: G13

Suggested Citation

Andreasen, Jesper, Turbo Charging the Cheyette Model (June 1, 2001). Available at SSRN: https://ssrn.com/abstract=1719142 or http://dx.doi.org/10.2139/ssrn.1719142

Jesper Andreasen (Contact Author)

Saxo Bank ( email )

Philip Heymans Alle 15
Hellerup, 2900
Denmark

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