Pricing and risk management of interest rate swaps |
| |
Authors: | Sovan Mitra Paresh Date Rogemar Mamon I-Chieh Wang |
| |
Institution: | 1. Glasgow Caledonian University London Campus, London E1 6PX, United Kingdom;2. Brunel University, Uxbridge, UB8 3PH, United Kingdom;3. University of Western Ontario, London, Ontario N6A 5B7, Canada;4. Meiho University, Pingtung, Taiwan |
| |
Abstract: | This paper reformulates the valuation of interest rate swaps, swap leg payments and swap risk measures, all under stochastic interest rates, as a problem of solving a system of linear equations with random perturbations. A sequence of uniform approximations which solves this system is developed and allows for fast and accurate computation. The proposed method provides a computationally efficient alternative to Monte Carlo based valuations and risk measurement of swaps. This is demonstrated by conducting numerical experiments and so our method provides a potentially important real-time application for analysis and calculation in markets. |
| |
Keywords: | Swaps Risk management Financial mathematics Numerical analysis Stochastic interest rates |
本文献已被 ScienceDirect 等数据库收录! |
|