Fast and Accurate Pricing and Hedging of Long-Dated CMS Spread Options

We present a fast method to price and hedge CMS spread options in the displaced-diffusion co-initial swap market model. Numerical tests demonstrate that we are able to obtain sufficiently accurate prices and Greeks with computational times measured in milliseconds. Further, we find that CMS spread options are weakly dependent on the at-the-money Black implied volatility skews

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Year of publication:	2010
Authors:	Joshi, Mark S.
Other Persons:	Chao Yang (contributor)
Publisher:	[2010]: [S.l.] : SSRN
Subject:	Hedging \| Optionspreistheorie \| Option pricing theory \| Numerisches Verfahren \| Numerical analysis \| Swap

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