In an affine term structure framework with stochastic volatility, we derive the characteristic function of the log swap rate. Having the characteristic function, we employ Fast Fourier Techniques (FFT) to price swaptions. Using ten years of swap rates and swaption premiums, model parameters are...

We investigate the theoretical and empirical difference between thestandard convexity adjustment and Forward Libor Model in a particular case oftwo-period Constant Maturity Swaps. Using daily data from 1991 to 1997, wesimulate the difference (spread) between the two-period CMS swap rates...

Credit Default Swaps (CDS) are in the process of becoming, liquid and extremelyinformative instruments of default risk. Yet, default swap market has severalnovel aspects that have not received much attention. In this paper we studyan aspect of CDS´s that relates to the prediction of financial...