Da Fonseca, José; Gnoatto, Alessandro; Grasselli, Martino - In: Journal of Economic Dynamics and Control 37 (2013) 4, pp. 774-793
We present a flexible approach for the valuation of interest rate derivatives based on affine processes. We extend the methodology proposed in Keller-Ressel et al. (in press) by changing the choice of the state space. We provide semi-closed-form solutions for the pricing of caps and floors. We...