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First of all, a Bermudan Swaption does not have to be of American type. Consider a "9NC2 Bermudan" (9 non call 2), basically a Bermudan swaption with final maturity in 9 years which is not exercisable for the first 2 years. I have not worked at an exotic rates desk in a while (many years to be more precise) but from what I remember you need to use a ...


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That seems to be a nice paper but I haven't worked through it completely yet. As I understand it, the goal is to replicate the holding (by an investor) of an European option using an American option, stock and bonds in a self-financing manner. As the value of the underlying changes this requires rebalancing of the option and the bond, i.e. hedging. Since ...



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