Calibration and Pricing in a Multi-Factor Quadratic Gaussian Model
AbstractWe consider a two-country multi-factor quadratic Gaussian model and provide efficient formulas for the price of default free bonds and the calibration of the model to the default free discount term structure. We also provide approximations for the price of default free swaptions in such a model indicating the limitation of using an approach based on replacing certain martingales by their expectation.
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Date of creation: 01 May 2007
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