The Co-Initial Swap Market Model

18 Pages Posted: 15 Apr 2005

Multiple version iconThere are 2 versions of this paper

Date Written: December 26, 2003

Abstract

In this paper, we introduce a new approach to the pricing and the risk-management of generic European-style interest rate derivatives. This approach has great flexibility and has the advantage of avoiding complex model calibration techniques typical of standard short-rate models. Dynamics are assigned on a set of co-initial forward swap rates and arbitrage-free restrictions are determined in a normal and lognormal setup. Model implementation and calibration are discussed and details of two example applications are also presented.

See published version of this paper located at: http://ssrn.com/abstract=595077.

Keywords: Swap market models, model calibration

JEL Classification: G12, G13

Suggested Citation

Galluccio, Stefano and Hunter, Christopher, The Co-Initial Swap Market Model (December 26, 2003). Available at SSRN: https://ssrn.com/abstract=650704 or http://dx.doi.org/10.2139/ssrn.650704

Stefano Galluccio (Contact Author)

BNP Paribas Fixed Income ( email )

10, Harewood Avenue
NW1 6AA London
United Kingdom

Christopher Hunter

Independent

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