SABR stochastic volatility model is appealing for modeling smile and skew of option prices. Hagan, who first proposed this model, derived a closed form approximation for european options and showed that it provides consistent and stable hedges. Here I prove a new exact closed formula for the...

The basis between swaps referencing funded fixings and swaps referencing overnight-collateralized fixings (e.g. 6 month Euribor vs 6 month Eonia) has increased in importance with the 2007-9 liquidity and credit crises. This basis means that new pricing models for fixed income staples like caps,...

Providing the most up-to-date tools and techniques for pricing interest rate and credit products for the new financial world, this book discusses pricing and hedging, funding and regulation, and interpretation, as an essential resource for quantitatively minded practitioners and researchers in...