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Elia
Topic Author
Posts: 4
Joined: April 21st, 2017, 2:46 pm

Swaptions via cumulants method

May 25th, 2017, 7:39 am

Hi,

I'm trying to use the cumulats method which you can find here:

http://www.math.ku.dk/~rolf/DufGoldJoD.pdf

I also code a Monte Carlo method to compare the prices of swaptions computed via the cumulats method. I have found some errors between the 2 prices for swaptions ATM. 
Does anyone has any advice? Is it possible that this approximation does not work well in the ATM case?

When I try to price ITM and OTM swaptions, the prices computed with the 2 methods are pretty close (both G3 and CIR2).