Replication of flexi-swaps

F. Jamshidian, Ingmar Evers

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

Ingmar Evers and Farshid Jamshidian describe a relatively new product known as a flexi-swap and discuss its application in securitisation. A flexi-swap gives a counterparty an option to amortise the interest rate swap at an accelerated pace. They show that it can be replicated semi-statically by a vanilla amortising swap plus a portfolio of Bermudan swaptions. The derivation employs a novel ‘high-low interest rate path’ argument, which results in a simple algebraic formula for the weights
Original languageEnglish
Pages (from-to)67-70
Number of pages4
JournalJournal of risk and uncertainty
Publication statusPublished - 2005

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Swaps
Replication
Interest rate swaps
New products
Securitization
Interest rates
Bermudan swaption

Keywords

  • IR-82135
  • METIS-223886

Cite this

Jamshidian, F., & Evers, I. (2005). Replication of flexi-swaps. Journal of risk and uncertainty, 67-70.
Jamshidian, F. ; Evers, Ingmar. / Replication of flexi-swaps. In: Journal of risk and uncertainty. 2005 ; pp. 67-70.
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Jamshidian, F & Evers, I 2005, 'Replication of flexi-swaps' Journal of risk and uncertainty, pp. 67-70.

Replication of flexi-swaps. / Jamshidian, F.; Evers, Ingmar.

In: Journal of risk and uncertainty, 2005, p. 67-70.

Research output: Contribution to journalArticleAcademicpeer-review

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T1 - Replication of flexi-swaps

AU - Jamshidian, F.

AU - Evers, Ingmar

PY - 2005

Y1 - 2005

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AB - Ingmar Evers and Farshid Jamshidian describe a relatively new product known as a flexi-swap and discuss its application in securitisation. A flexi-swap gives a counterparty an option to amortise the interest rate swap at an accelerated pace. They show that it can be replicated semi-statically by a vanilla amortising swap plus a portfolio of Bermudan swaptions. The derivation employs a novel ‘high-low interest rate path’ argument, which results in a simple algebraic formula for the weights

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KW - METIS-223886

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JO - Journal of risk and uncertainty

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SN - 0895-5646

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Jamshidian F, Evers I. Replication of flexi-swaps. Journal of risk and uncertainty. 2005;67-70.