The Value of a Two-Sided Real Swaption

Authors

  • Nengsheng Fang School of Finance, Southwestern University of Finance and Economics, Chengdu 611130, China
  • Caixiu Liao School of Mathematical Sciences, South China Normal University, Guangzhou 510631, China

DOI:

https://doi.org/10.4208/jms.v55n3.22.06

Keywords:

Real option, swaption, two-sided matching, optimal exercise boundary.

Abstract

In this paper we establish a mathematical model for two-sided matching swaption problems in real world. We find a necessary matching condition of the two-sided swaption and deduce analytical formulations of the swaptions in virtue of pricing kernel methods. Also we explore the optimal exercise boundary and properties of the swaptions for investment decision making.

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Published

2022-09-01

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Issue

Vol. 55 No. 3 (2022)

Section

Articles

How to Cite

The Value of a Two-Sided Real Swaption. (2022). Journal of Mathematical Study, 55(3), 306-326. https://doi.org/10.4208/jms.v55n3.22.06