KENNEDY, JOANNE E.; PHAM, DUY - In: International Journal of Theoretical and Applied … 16 (2013) 05, pp. 1350030-1
In this paper, we study the implications for hedging Bermudan swaptions of the choice of the instantaneous volatility for the driving Markov process of the one-dimensional swap Markov-functional model. We find that there is a strong evidence in favor of what we term "parametrization by time" as...