Journal Article

The pricing and hedging of index amortizing rate swaps


Abstract: Index amortizing rate (IAR) swaps have proved difficult to price because of the complexity of their embedded options. Since these options depend on the path of interest rates, pricing requires a model of interest rate movements. This article uses a simple interest rate model to illustrate the pricing and hedging of an IAR swap.

Keywords: Swaps (Finance); Options (Finance); Interest rates;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Quarterly Review

Publication Date: 1993

Volume: 18

Issue: Win

Pages: 71-74