Valuation of Cancelable Cross Currency Bermudan Swaps

11 Pages Posted: 13 Feb 2004  

Milind Sharma

QuantZ Capital Management LLC

Jonathan Stein

Ernst & Young

Date Written: August 1997

Abstract

This paper presents a framework for the valuation of cancelable cross currency Bermudan swaps. We use a lognormal process for the exchange rate while the domestic & foreign forward rates are assumed to be Gaussian as in Heath et al. (1992). Monte-Carlo simulation is utilized for valuation via an extension to several dimensions of the methodology for simulating American options proposed by Grant et al. (1994). As special cases the model can be used to value cross currency swaps and single exercise Bermudans which can be used for benchmarking purposes.

Keywords: Monte-Carlo, Bermudan, Swaption, Heath-Jarrow-Morton

JEL Classification: C51, C15, G12

Suggested Citation

Sharma, Milind and Stein, Jonathan, Valuation of Cancelable Cross Currency Bermudan Swaps (August 1997). Available at SSRN: https://ssrn.com/abstract=498142 or http://dx.doi.org/10.2139/ssrn.498142

Milind Sharma (Contact Author)

QuantZ Capital Management LLC ( email )

44 Wall St., 12th Floor
12th Floor
NY, NY 10005
United States

Jonathan Stein

Ernst & Young

1225 Connecticut Ave NW # 700
Washington, DC 20036
United States

Paper statistics

Downloads
734
Rank
26,650
Abstract Views
2,865