Abstract
This paper proposes new bounds on the prices of European-style swaptions for affine and quadratic interest rate models. These bounds are computable whenever the joint characteristic function of the state variables is known. In particular, our lower bound involves the computation of a one-dimensional Fourier transform independently of the swap length. In addition, we control the error of our method by providing a new upper bound on swaption price that is applicable to all considered models. We test our bounds on different affine models and on a quadratic Gaussian model. We also apply our procedure to the multiple curve framework. The bounds are found to be accurate and computationally efficient.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
