Journal of Computational Finance
ISSN:
1460-1559 (print)
1755-2850 (online)
Editor-in-chief: Christoph Reisinger
Eurodollar futures convexity adjustments in stochastic volatility models
Vladimir V. Piterbarg, Marco A. Renedo
Abstract
ABSTRACT
A formula that explicitly incorporates volatility smile, as well as a realistic correlation structure of forward rates, in computing Eurodollar futures convexity adjustments is derived. The effect of volatility smile on convexity adjustments is studied and is found to be significant.
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