Pricing the Bermudan Swaption with the Efficient Calibration

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概要

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• This paper presents a tree construction approach to pricing a Bermudan swaption with an efficient calibration method. The Bermudan swaption is an option, which at each date in a schedule of exercise dates gives the holder the right to enter an interest swap, provided that this right has not been exercised at any previous time in the schedule. Assuming a common diffusion short rate dynamics, the Hull-White model, we propose a dynamic programming approach for their risk neutral evaluation. We derive a BGM, Brace-Gatarek-Musiela, like equation from the Hull-White model, that is, each forward LIBOR with an additive constant follows log-normal martingale under the corresponding probability measure. Using the result we can easily derive theoretical prices of an European swaption by the Black-Scholes formula and the Rebonato's approximation. Utilizing the theoretical prices, we succeed to make the calibration easy and fast.

• 名古屋商科大学の論文

著者

• 丹波 靖博

  名古屋商科大学会計ファイナンス研究科

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• Exercise Strategies for the Bermudan Swaption
• Pricing the Bermudan Swaption with the Efficient Calibration

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