Farmer's CMS Spread Option Formula for Negative Rates

4 Pages Posted: 7 Nov 2015 Last revised: 26 Feb 2018

Date Written: February 20, 2018

Abstract

We extend the cms spread option formula in Brigo/Mercurio's yellow book, 13.16.2 to the case of shifted lognormal or normal swap rate dynamics and describe the implementation in QuantLib.

Keywords: CMS spread option, shifted lognormal, normal, negative rates

JEL Classification: C00

Suggested Citation

Caspers, Peter, Farmer's CMS Spread Option Formula for Negative Rates (February 20, 2018). Available at SSRN: https://ssrn.com/abstract=2686998 or http://dx.doi.org/10.2139/ssrn.2686998

Peter Caspers (Contact Author)

AcadiaSoft Inc. ( email )

United States

HOME PAGE: http://acadiasoft.com

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