I have a problem with the underlying assumption in the future/forward convexity adjustment. If I understand correctly, the assumption is, if I am long ED, I earn money when rates go down and invest ...
How do you calculate the Potential Future Exposure (PFE) for a swaption? Do you incorporate the dynamics of implied volatility when you are running your simulations? Is there a standard way to ...
How to calculate to calculate daily interest accruals and cashflows for the full term of the swap, given notional, effective date, maturity date: (total one year), accrual: ACT/360 payment: ...