Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
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The Libor swap rate fallbacks proposed by different working groups are transforming vanilla swaptions into exotics with extra convexity adjustments. Marc Henrard proposes different pricing methodologies for cash-settled swaptions with collateralised discounting and exotic swaptions, including several price approximations to reduce the numerical complexity of
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