As a consequence of the high volatility regime recently established in the government bond market, investors may seek hedging their exposure to floating asset swap spreads. We obtain an analytical convexity correction for the asset swap spread which is instrumental to the pricing of constant...

We present a methodology to price a cash-settled swaption with strike contingent on the level of an equity index. The hybrid local volatility framework allows for calibration to market skew/smile and straightforward specification of an exogenous correlation. The framework can be extended to...