Caplet Pricing with Backward-Looking Rates

6 Pages Posted: 8 Mar 2020

Date Written: January 1, 2020

Abstract

We consider the Hull-White short rate model and extend the known closed-form pricing kernel to include the integrated short rate as a separate independent variable, applying it to cap/floor pricing.

Keywords: Hull-White, short rate model, pricing kernel, LIBOR replacement, backward-looking rates, compounded rates

Suggested Citation

Turfus, Colin, Caplet Pricing with Backward-Looking Rates (January 1, 2020). Available at SSRN: https://ssrn.com/abstract=3527091 or http://dx.doi.org/10.2139/ssrn.3527091

Colin Turfus (Contact Author)

Deutsche Bank ( email )

Winchester House
1 Great Winchester Street
London, EC2N 2DB
United Kingdom

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