We propose a new class of European swaption pricing models, under the assumption
that the underlying term structure dynamics follow multi-factor Levy processes. Our
approximated solutions are based on well-known results of a Gram Charlier
expansion. Based on the proposed methods, we obtain the approximated solutions for
two interesting cases of term structure settings; the 3-factor Gaussian HJM model,
and the 3-factor Gaussin HJM model with an additional factor which follows a Normal
Inverse Gaussian process. Similar to ours, Dufresne and Goldstein (2001) also
propose an algorithm for pricing swaptions when the underlying term structure
dynamics are ane. While ours share the same spirit of Dufresne and Goldstein
(2001), our solutions dier from theirs, in that we model the underlying term
structure dynamics as Levy processes, which include Brownian motions as a special
case,and that we can easily incorporate the information on the initial term
strucutre of interest rates and the current term structure of volatilities, since
our models are derived from the HJM setting. Numerical results show that our
proposed methods performs quite well even for the general process.
학회소식
공지사항
[2003년 제 2차] Generalized Swaption Pricing Models
작성자 : 관리자
조회수 : 1212
게시일 :
2003-07-12