Overview - 2023.2 English

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2023.2 English

Using the Finite-difference methods (FDM) to estimate the value of Bermudan Swaption. Here, we assume that the floating rate at each time point conforms to Hull-White model.

In Bermudan swaption, the owner is allowed to enter the swap on several pre-specified dates, usually coupon dates of the underlying swap. Notice that we evaluate the value of the swaption as a payer who pay the fixed leg and receive the floating leg of the interest rates.