Replication of flexi-swaps

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Evers, Ingmar and Jamshidian, Farshid (2005) Replication of flexi-swaps. Risk magazine . pp. 67-70.

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Abstract:Ingmar Evers and Farshid Jamshidian describe a relatively new product known as a flexi-swap and discuss its application in securitisation. A flexi-swap gives a counterparty an option to amortise the interest rate swap at an accelerated pace. They show that it can be replicated semi-statically by a vanilla amortising swap plus a portfolio of Bermudan swaptions. The derivation employs a novel ‘high-low interest rate path’ argument, which results in a simple algebraic formula for the weights

Item Type:Article
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Electrical Engineering, Mathematics and Computer Science (EEMCS)
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Link to this item:http://purl.utwente.nl/publications/82135
Official URL:http://www.risk.net/risk-magazine/technical-paper/1530282/replication-flexi-swaps
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