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by Jhammer
April 18th, 2019, 7:51 pm
Forum: Trading Forum
Topic: Callable debt
Replies: 8
Views: 5840

Re: Callable debt

Your question is not clear enough, neither is your proposed approach! callable bonds are usually priced by an IR pricing tree. It may also be possible to price the callable bond synthetically.
by Jhammer
June 30th, 2016, 6:00 pm
Forum: Technical Forum
Topic: Smoothing/Interpolation of credit spread curve with missing data
Replies: 2
Views: 650

Smoothing/Interpolation of credit spread curve with missing data

Missing terms --> interpolationMissing rating --> proxy or company's debtetc?
by Jhammer
April 4th, 2016, 2:05 pm
Forum: Technical Forum
Topic: Cap&Floor: benchmark pricing model
Replies: 1
Views: 1373

Cap&Floor: benchmark pricing model

<r>How about Normal or shifted Lognormal? This could be useful for you: <URL url="http://www.wilmott.com/messageview.cfm?catid=4&threadid=98307"><LINK_TEXT text="http://www.wilmott.com/messageview.cfm? ... adid=98307">http://www.wilmott.com/messageview.cfm?catid=4&threadid=98307</LINK_TEXT><...
by Jhammer
February 10th, 2016, 6:12 pm
Forum: Technical Forum
Topic: Credit Modeling in Interest Rate Tree
Replies: 4
Views: 1852

Credit Modeling in Interest Rate Tree

I was mixing up transition probabilities with survival probabilities; and hazard rate dynamics appear in both..
by Jhammer
February 10th, 2016, 3:54 pm
Forum: Technical Forum
Topic: Credit Modeling in Interest Rate Tree
Replies: 4
Views: 1852

Credit Modeling in Interest Rate Tree

Thanks for this: "Numeraire_(T-1) x E[1_{tau>T} X_T / Numeraire(T)] + Numeraire_(T-1) x E[1_{tau<T} R/Numeraire(T)] "So we need to incorporate both 'survival' and 'default' states in pricing the instrument, which are two disjoint events.
by Jhammer
February 9th, 2016, 5:42 pm
Forum: Technical Forum
Topic: Credit Modeling in Interest Rate Tree
Replies: 4
Views: 1852

Credit Modeling in Interest Rate Tree

<t>Let say you have to use a pricing tree for valuation of a defaultable callable (or putable) bond. Short interest rate is assumed to follow HW one-factor model. Hazard rate follows a similar HW one-factor model correlated with short rate. Recovery rate is constant. This framework is discussed in "...
by Jhammer
January 12th, 2016, 8:46 pm
Forum: Technical Forum
Topic: callable range accrual pricing
Replies: 5
Views: 14765

callable range accrual pricing

<t>Hi Kelang,May I ask about the trick that speeds up pricing in your approach?Also, which measure is your pricing tree calibrated to? I assume it is calibrated to a forward measure. Now let say the tree is calibrated to risk-neutral measure, does anyone know any work-around to correctly price a cal...
by Jhammer
October 13th, 2015, 7:52 pm
Forum: Technical Forum
Topic: Pricing of Contingent CDS
Replies: 2
Views: 3507

Pricing of Contingent CDS

Yes, as you said, liquid volatilities do not exist for xxcy swaptions. There may be a way to model this as an exchange option and use Margrabe formula. This would imply lognormality assumption for the two swap legs.
by Jhammer
September 16th, 2015, 5:27 pm
Forum: Technical Forum
Topic: Pricing of Contingent CDS
Replies: 2
Views: 3507

Pricing of Contingent CDS

<t>Hi,Contingent CDS is a type of CDS, where the notional is the greater of zero and MtM value of the underlying derivative (usually some type of swap) at the time of default. This instrument is known as the prefect hedge for the counterparty CVA. Assuming there is no correlation between default of ...
by Jhammer
September 9th, 2015, 1:30 pm
Forum: Technical Forum
Topic: SABR vs Heston in rates modelling
Replies: 8
Views: 5089

SABR vs Heston in rates modelling

<r>These reads could be useful:<URL url="http://wilmott.com/messageview.cfm?catid=8&threadid=75644andhttp://www.wilmott.com/messageview.cfm?catid=4&threadid=96809"><LINK_TEXT text="http://wilmott.com/messageview.cfm?cati ... adid=96809">http://wilmott.com/messageview.cfm?catid=8&threadid...
by Jhammer
April 2nd, 2015, 1:04 pm
Forum: Technical Forum
Topic: Volatility surface interpolation
Replies: 10
Views: 25631

Volatility surface interpolation

<t>QuoteOriginally posted by: LH1984Thanks for you explanation Jhammer.One stupid question, what is the rational of having T here? It looks like the interpolation give higher weight on vol or variance with longer maturity.But the Vol is annualised vol, no? Is there any website/resource for this? Tha...
by Jhammer
April 1st, 2015, 6:34 pm
Forum: Technical Forum
Topic: Filling up swaption missing vols
Replies: 8
Views: 3577

Filling up swaption missing vols

Thanks for your input, I will look into it
by Jhammer
April 1st, 2015, 6:06 pm
Forum: Technical Forum
Topic: Volatility surface interpolation
Replies: 10
Views: 25631

Volatility surface interpolation

Here is the simple solution for linear interpolation of total vol in your example:$$ \sigma^{*^2} \times 2 = \frac{A^2 + 3B^2}{2} \quad \rightarrow \quad \sigma^{*} = \sqrt{\frac{A^2 + 3B^2}{4}}$$
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