Joshua,would you send me a copy?kipi001@yahoo.frRegards

You could find the answer in Brigo Mercurio Book "Interest rates models"P255....If you want more details, please tell me...Regards,Kipi.

<t>For dfitoussi,As you know, you can write your swap rate with your zero coupon rates or with your forward rates .So once you have simulate along a path, a strip of Libors, for exemple, Denote Lx(t) by the value at time t of the LIBOR-6M expiring (i.e. fixing) at time x. For the sake of this discus...

<t>According to me, the best way to price this product is to use a stochastic vol model who can handdle the smile....With a simpler model, i think you can't do this: Your price will be far away...Once your stochastic model is calibrated to the swaption smile, you just run a Monte carlo to obtain you...

<t>If I well understand, it' s a sum of digitals :at each time i you receive 1% if the CMS at this time is < 4.50% , 0 if not ???In this case, write (CMS - K, 0 ) = f(K, sigma(K)) then 1{CMS>K} = - df/dK - (df/dsigma)*(dsigma/dK)so your payoff is a call on spread plus a smile component...You didn't ...

<t>You ca google this :CMS convexity correction, Patrick HAGAN...An examination of the convexity adjustement technique in the pricing of CMS, Nevena SELICConvexity correction, PELSSERI will be very interest by your thesis about snowball callable.Wich model do you use...???How do you handle the calla...

Hi everybody,someone has an answer??Thanks,Kipi...

<t>the Gilt is the England government Bond : Your bond have a maturity , coupons per year and a price! you must be able to calculate the par yield of your bond! suppose you got 4 per cent.If the Libor12months, for example is 3.5 per cent, then you can convert your price to Libor12m + 50 bps....Regar...

Suppose you have a up and out call on a stock, If the volatility of the stock goes up, the probability that the stock hits the barrier is bigger, so your option will have less value; The vega of a up and out call is negative.It' s the same thing for others knock out in general.regards,Kipi.

OK, thanks Clopinette,I agree with you there is a swaption skew.in order to calibrate the skew, i can add a stochastic volatility to my LMM.Once it' s made, if I calibrate the correl, I would be able to retrieve the prices of a cap on CMS spread : How can i achieve the last steps?

<t>Hi Clopinette,1/ The broker quotes I have are firm orders 2/ As I can accurately obtain the prices of swaptions with LMM, I think we should obtain the same thing for CMS spread option. Suppose you want to price an exotic structure on spread CMS ( for example a ratchet on spread CMS or anything el...

Some references :CMS convexity correction, Patrick HAGAN, a star who use to speak in this forumAn examination of the convexity adjustement technique in the pricing of CMS, Nevena SELICConvexity correction, PELSSERRegards,Kipi.

I think you can find the answer in "les swaps, Chazot, Economica"...i remember he gives a pricing methodology, but i'm not really sure;if you don't have the answer the nextweek, i will have a look on he book, and give you an answer.regards.

<t>Pat, Vlad....please i need your help ...(-)Hi, I must quote at T(0) a call on a spread CMS, MAX ( CMS10Y(T(i)) - CMS2Y(T(i)) -K, 0) where K is the strike and the fixing date is T(i), payment at T(i+1).I use two methods :1// A closed form approximation , generalised Black Scholes, and my inputs ar...

<t>Hi, I must quote at T(0) a call on a spread CMS, MAX ( CMS10Y(T(i)) - CMS2Y(T(i)) -K, 0) where K is the strike and the fixing date is T(i), payment at T(i+1).I use two methods :1// A closed form approximation , generalised Black Scholes, and my inputs are CMS10y(0,T(i)), CMS2y(0,T(i)), the instan...