Option pricing model with non-constant volatility models are compared to stochastic volatility ones. The non-constant volatility models considered are the Dupire's local volatility and Hobson and Rogers path-dependent volatility models. These approaches have the theoretical advantage of...

This research aims to develop a valuation technique for constant maturity swaps (CMS) based on convexity corrections. We explicitly incorporates into our valuation model both 1) complex shift patterns of the yield curve and 2) implied volatility smile and skew effects. The method requires...