Caplet Pricing with Backward-Looking Rates
Wilmott Magazine, September 2022, pp. 106-9.
7 Pages Posted: 8 Mar 2020 Last revised: 11 Jan 2023
Date Written: January 1, 2020
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: Suggested Citation
Turfus, Colin, Caplet Pricing with Backward-Looking Rates (January 1, 2020). Wilmott Magazine, September 2022, pp. 106-9., Available at SSRN: https://ssrn.com/abstract=3527091 or http://dx.doi.org/10.2139/ssrn.3527091
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