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Convexity of a multiple of a CMS rate
Posted: November 8th, 2005, 2:59 pm
by Diskiss
I have to price a swap that pays :Leg 1 = 6m libor Fixing in advance payment in arrears + premiumLeg 2 = CMS10 x 2 Fixing in advance payment in arrears On the CMS10, I calculate a convexity adjustment.but I am wondering…can I just do (CMS10 + adjustment)*2 ? is it correct?Thanks.
Convexity of a multiple of a CMS rate
Posted: November 8th, 2005, 3:38 pm
by Diskiss
double post
Convexity of a multiple of a CMS rate
Posted: November 9th, 2005, 8:54 am
by Sgaragnaus
Uh? That's right of course.P = DF(0) * E_t2 [ 2 * SW(t1,t1,T) ] = 2 * DF(0) * E_t2 [ SW(t1,t1,T) ] = 2 * DF(0) * [ SW(0,t1,T) + Conv. Corr.]
Convexity of a multiple of a CMS rate
Posted: November 9th, 2005, 11:50 pm
by Diskiss
thanks for your answer