When modelling the term structure of interest rates, one widespread possibility is using the Black-Karasinski model, which is given by the following stochastic process ...
I happened to get this question for Fixed Income Swap contract. (let's assume it's it's not cross currency). If the fixed leg is paying 10% interest rate in this contract, but in the market the ...
Is it true that pricing an IR swap doesn't require any stochastic model but calculation of the PFE of an IR swap would?
Pricing an IR swap doesn't require any stochastic model but calculation of the PFE for an IR swap would require the Hull White Model or any other stochastic short rate or forward rate model. Is ...
I have heard that the SABR volatility model was not good at pricing a constant maturity swap (CMS). How is that?
It is well known that vanilla fixed for floating swaps usually have a bit of gamma, but does a floating for floating (basis) swap have any? For the sake of simplicity, let's assume that both legs of ...