In this paper we consider the valuation of total return swaps (TRS). Since a total return swap is a collateralized … agree on a unique value. Consequently it is not possible to have cash collateralization of the total return swap matching … each counterparts valuation. The total return swap is a collateralized derivative with a natural funding valuation …

In this article, we apply the forward variance modeling approach by L.Bergomi to the co-terminal swap market model. We …

very satisfactory under four different pricing error functions. The result is that taking a position in a third moment swap … considerably improves the performance of the standard hedge of a variance swap based on a static position in the log-contract and a … dynamic trading strategy. The position in the third moment swap is taken by running a Monte Carlo simulation …

to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use … swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as …