• Ratchet Swap Model

    Author(s):
    Tim Xiao (see profile)
    Date:
    2022
    Group(s):
    Business Management
    Subject(s):
    Options (Finance), Derivative securities
    Item Type:
    Article
    Tag(s):
    derivatives pricing
    Permanent URL:
    https://doi.org/10.17613/pd4v-xb05
    Abstract:
    The valuation methodology is based on the Monte Carlo spot LIBOR rate model. The model generates spot rates which log-normally distributed at each reset date. These spot rates are derived from corresponding forward rates whose stochastic behavior is constructed in an arbitrage-free manner. Outcomes for the spot rate are generated for each reset date. These rates are then applied to the ratchet-type payoff structure. The ratchet instrument is then valued by discounting and averaging these payoffs.
    Notes:
    https://finpricing.com/lib/FiBondCoupon.html
    Metadata:
    Status:
    Published
    Last Updated:
    2 years ago
    License:
    Attribution

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