Valuing Interest Rate Swap Contracts in Uncertain Financial Market
AbstractSwap is a financial contract between two counterparties who agree to exchange one cash flow stream for another, according to some predetermined rules. When the cash flows are fixed rate interest and floating rate interest, the swap is called an interest rate swap. This paper investigates two valuation models of the interest rate swap contracts in the uncertain financial market. The new models are based on belief degrees, and require relatively less historical data compared to the traditional probability models. The first valuation model is designed for a mean-reversion term structure, while the second is designed for a term structure with hump effect. Explicit solutions are developed by using the Yao–Chen formula. Moreover, a numerical method is designed to calculate the value of the interest rate swap alternatively. Finally, two examples are given to show their applications and comparisons. View Full-Text
Scifeed alert for new publicationsNever miss any articles matching your research from any publisher
- Get alerts for new papers matching your research
- Find out the new papers from selected authors
- Updated daily for 49'000+ journals and 6000+ publishers
- Define your Scifeed now
Xiao, C.; Zhang, Y.; Fu, Z. Valuing Interest Rate Swap Contracts in Uncertain Financial Market. Sustainability 2016, 8, 1186.
Xiao C, Zhang Y, Fu Z. Valuing Interest Rate Swap Contracts in Uncertain Financial Market. Sustainability. 2016; 8(11):1186.Chicago/Turabian Style
Xiao, Chen; Zhang, Yi; Fu, Zongfei. 2016. "Valuing Interest Rate Swap Contracts in Uncertain Financial Market." Sustainability 8, no. 11: 1186.