Bounding Bermudans

Thomas Roos derives model-independent bounds for amortising and accreting Bermudan swaptions

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Thomas Roos derives model-independent bounds for amortising and accreting Bermudan swaptions in terms of portfolios of standard Bermudan swaptions. In addition to the well-known upper bounds, the author derives new lower bounds for both amortisers and accreters. Numerical results show the bounds to be quite tight in many situations. Applications include model arbitrage checks, limiting valuation uncertainty, and super-replication of long and short positions in the non

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