# Questions tagged [bermudan]

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47 views

### Hedge robustness of the one factor Hull White model

I recently came across a quote in a book: "All single factor models share the limitation that shifts in curve levels cause shifts in the package of vanilla options that are a good hedge for the ...
101 views

### Why does a Bermudan option have a higher implied volatility than its European counterpart?

I get that the premium for an earlier exercise should be higher to compensate the seller but intuitively you would think that the spot has "less room to run" in a potentially shorter period of time (...
56 views

### Inequality involving Co-Terminal/Co-Initial American vs Bermudan Swaptions

Let us consider a payment schedule $\mathcal{P}:=\{t_1,\dots,t_n\}$ which has a corresponding fixing schedule $\mathcal{F}:=\{t_0,\dots,t_{n-1}\}$. We have a series of co-terminal and co-initial swaps ...
621 views

### Valuation of Bermudan option as maximum of relevant European options

Assume I need to price a Bermudan option which can be exercised at following dates: $t_1$, $t_2$, ..., $t_n$. I think that the price of such an option will be maximum of the prices of European options ...
95 views

### Bermudan option exercise probability when rates rise

I am looking for an explanation of what happens to the Bermudan exercise probability (i.e. does probability of early exercise go higher if rates rise or lower) w.r.t rates. This is of course with ...
14 views

### How to show the Bermudan put option is convex in strike price?

Is there a way to generalise the arbitrage argument for a European put being convex in strike price to the Bermudan option? (i.e. considering two portfolios, showing one has greater value than the ...
15 views

### Introducing initial lockout period for American-Asian options pricing in R

Currently attempting to price American-Bermuda-Asian call options using Monte Carlo simulations as done in Longstaff and Schwartz (2001). The options have an initial lockout period of 3 months, ...
157 views

### Is Longstaff-Schwartz best method for Bermudan options?

What is the go-to method for pricing of Bermudan/American options? I've heard the Longstaff-Schwartz method is really popular. Is it better than the other methods generally speaking? If not, which ...
74 views

### Lower bound for Bermudan Option Price

i have the following question. The price of an Bermudan option is given by \begin{align*} V_{0} = \sup_{\tau \in \mathcal{T}(0,\dots, T)} \mathbb{E}[f_{\tau}(X_{\tau})]. \end{align*} It is ...
418 views

### Bermudan Swaption

Is there an equation of the kind of call-put parity for Bermudean swaptions ? (maybe an inequality ) Is there an intuitive description of what would be an optimal exercise moment ? Intuitively I ...
103 views

### Asian Options Vs Bermudan Options

Which of these options are more popular in practice/used in industry? And where exactly are they used? Also, I have been searching for listed Asian and Bermudan options, for volume data etc, but have ...
145 views

### Moneyness for Cancellable Swaps

Hi I wanted to know we can assess the moneyness of Cancellable swaps? For example, I have a swap where I am paying the fixed rate and also have an option to cancel this option. How do I assess the ...
126 views

### RQuantLib: BermudanSwaption(): effective date later than or equal to termination date

When running the command in the RQuantLib library: ...
301 views

### Bermudan Swaptions

Can someone explain, in layman's terms, the mechanics behind Bermudan Swapttions ( without having recourse to pricing models )? Why are they popular? when are they used ? How are they hedged i.e ...
30 views

### Option style with grant date

The following option exercise style is somewhere between American and European: There is a fixed grant date $N_1$ at which you determine at which date $N_2>N_1$ the option will be exercised. So ...
468 views

### Pricing back swaptions corresponding to underlying swaps of Bermudan Swaption in calibrated LMM

I do not know to which swaption volatility matrix I have to calibrate the LMM in order to price back correctly the swaptions corresponding to the underlying swaps of a Bermudan Swaption. My problem: ...
239 views

### Overpricing Bermudan swaption using Shifted LMM

I am trying to model a callable range accrual note linked to the EUR CMS spread, 20Y-10Y, with cap and floor. The note is Bermudan, callable starting year 3, every 3 years till maturity at 30 year. We ...
433 views

### Can call options be priced with Least-Squares Monte Carlo?

I have been reading about Least-Squares Monte Carlo (using Longstaff & Schwartz algorithm) for option pricing. So far, I have only read examples that uses LSMC for american/bermudan PUT options ...
3k views

### How can one value a Bermuda option?

A Bermuda option allows early exercise at predefined dates, e.g. at maturity equal to $t_1$, $t_2$, $t_3$,...; hence , would its value be the sum of 3 discounted European options with 1-year ...