Abstract
We have defined, in Section 3.4, how the value of caps/floors (as well as caplets/floorlets) depends on the future distribution of F k (t) under the T k -forward measure Qk associated with the numeraire P d (t,T k ). Equivalently, the swaption value depends on the future distribution of S m ,n(t) under the swap measure Qm.n associated with the numeraire A d ,m,n (t).
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© 2015 Christian Crispoldi, Gérald Wigger and Peter Larkin
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Crispoldi, C., Wigger, G., Larkin, P. (2015). Vanilla Models. In: SABR and SABR LIBOR Market Models in Practice. Applied Quantitative Finance series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137378644_4
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DOI: https://doi.org/10.1057/9781137378644_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-57177-2
Online ISBN: 978-1-137-37864-4
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