The pricing and hedging of index amortizing rate swaps
Index amortizing rate (IAR) swaps have proved difficult to price because of the complexity of their embedded options. Since these options depend on the path of interest rates, pricing requires a model of interest rate movements. This article uses a simple interest rate model to illustrate the pricing and hedging of an IAR swap.
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Article provided by Federal Reserve Bank of New York in its journal Quarterly Review
Volume (Year): (1993)Handle:
Issue (Month): Win ()
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Related researchKeywords: Swaps (Finance)
; Options (Finance)
; Interest rates
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