My Future is Not Convex
5 Pages Posted: 8 May 2012 Last revised: 9 May 2012
Date Written: May 8, 2012
We propose a framework where interest rate futures pricing do not require convexity adjustment. The adjustment depends on the definition of curves and we build them in such a way that no adjustment is necessary. The framework is theoretically as acceptable as the standard (current) approach and may prove in some circumstances simpler to work with in practice.
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