Transcription of The Pricing and Valuation of Swaps - Georgia State …
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The Pricing and Valuation of Swaps - Georgia State …
The Pricing and Valuation of Swaps1 I. Introduction The size and continued growth of the global market for OTC derivative products such as Swaps , forwards, and option contracts attests to their increasing and wide-ranging acceptance as essential risk management tools by financial institutions, corporations, municipalities, and government entities. Findings from a recent Bank of International Settlements (BIS) survey indicate that outstanding notional amounts of these products as of mid-year 2008 surpassed $516 trillion or $ trillion in gross market value, which represents the cost of replacing all open contracts at prevailing market prices. Of these totals, interest rate Swaps alone accounted for $357 trillion in notional amount or $ trillion in gross market value. In this chapter we focus on this important component of the market for derivatives Swaps and provide a primer on how they are priced and valued.
The Pricing and Valuation of Swaps1 I. Introduction The size and continued growth of the global market for OTC derivative products such as swaps,
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