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The pricing and hedging of index amortizing rate swaps

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  • Julia D. Fernald

Abstract

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.

Suggested Citation

  • Julia D. Fernald, 1993. "The pricing and hedging of index amortizing rate swaps," Quarterly Review, Federal Reserve Bank of New York, vol. 18(Win), pages 71-74.
  • Handle: RePEc:fip:fednqr:y:1993:i:win:p:71-74:n:v.18no.4
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    Cited by:

    1. Emanuele Casamassima & Lech A. Grzelak & Frank A. Mulder & Cornelis W. Oosterlee, 2021. "Pricing and Hedging Prepayment Risk in a Mortgage Portfolio," Papers 2109.14977, arXiv.org, revised Oct 2021.

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