Full implications for CMS convexity
Full implications for CMS convexity
Constant maturity swap (CMS) convexity adjustments are driven by the covariance between the underlying swap rate, its associated annuity and the discount bond of the payment delay.
This implicitly involves the volatility and correlations of rates of different tenors, and since there is a developed derivatives market in all these quantities (via caps, swaptions and CMS spread options, for instance), the size of the convexity adjustment can be linked to market-implied volatilities and correlations
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Interest rate derivatives
Risky caplet pricing with backward-looking rates
The Hull-White model for short rates is extended to include compounded rates and credit risk
The curious case of backward short rates
A discretisation approach for both backward- and forward-looking interest rate derivatives is proposed
Cross-currency swaps will use RFRs on both legs, says JP exec
Despite slow start, all-RFR swaps will become the market standard within a year, according to Tom Prickett
June mid-month auctions – Coupon and yield trends
As Treasury issuance amounts set new records, coupons at the front end of the curve have marched downward, while back-end coupons have lagged. Yield spreads across each popular measure show a consistent steepening of the curve through the first half of…
Forging a third way: Bringing efficiencies and standardisation to the non-cleared swaps market
Sponsored survey analysis: LCH
LCH set to clear 50-year Sonia swaps
Clearing house says it will clear long-dated swaps linked to the sterling overnight rate by end of 2017
ECB backed to fix floundering euro swaps reform
Swiss, UK and US progress leaves euro swaps market playing catch-up in rates reform
