Abstract
This chapter is devoted to interest rate derivatives. Interest rate derivatives are financial products derived from interest rates. There are various interest rates that will be mentioned in this chapter. Here we first give the meaning of each interest rate and derive some relations among them.
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Notes
- 1.
This expression can also be obtained by integrating Eq. (5.23) with α = 0 directly, and for the case α = 0, this direct way of finding the solution is easier.
- 2.
For such a choice of λ(r, t), \(u(r,t) -\lambda (r,t)w(r) = -\bar{\lambda }(t)w(r)\), so u(r, t) disappears from the PDE. Thus we do not need u(r, t) in order to solve the PDE.
- 3.
A swap can also be between two companies.
- 4.
If the conditions \(Z_{i} \geq Z_{i+1}\), i = 0, 1, ⋯N − 1 are not satisfied, then some modification needs to be done in order to guarantee the monotonicity.
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Zhu, Yl., Wu, X., Chern, IL., Sun, Zz. (2013). Interest Rate Derivative Securities. In: Derivative Securities and Difference Methods. Springer Finance. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7306-0_5
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