Motivated by statistical tests on historical data that confirm the normal distribution assumption on the spreads between major constant maturity swap (CMS) indexes, we propose an easy-to-implement two-factor model for valuing CMS spread link instruments, in which each forward CMS spread rate is...

This note proposes a new approach of valuing deep in-the-money fixed strike and discretely monitoring arithmetic Asian options. This new approach prices Asian options whose underlying asset price evolves according to the exponential of a Lévy process as a weighted sum of European options....