Valuation models

Cancelable and extendible swaps

The plain swap plus a swaption into the opposite or the same swap, Bermudan on Hull-White calibrated to the co-terminals or European by Bachelier, for either holder, with the breakeven fixed rate and PV01.

Inputs

CurrencyNotionalMaturity inyFixed rate%Fixed leg frequencyFirst cancel date inySwaption normal volbpCurveCurve: flat rate% cc

Fixed rate at parCancel on every coupon date (Bermudan)Give the Hull-White vol instead of calibrating

Results

Explain this result

Get a plain-English reading of the numbers above and what drives them.

Preview: rule-based reading. AI-assisted explanations run on the analytics core.

Methodology

Conventions

Cancelable: the swap plus a Bermudan swaption into the opposite swap, exercisable on each fixed coupon date from the first cancel date.
Extendible: the swap plus a European swaption at maturity into the same swap for the extension.
Bermudans on Hull-White calibrated to the co-terminal Europeans; Europeans by Black-76 or Bachelier.

References

Hull, Options, Futures, and Other Derivatives
Brigo and Mercurio, Interest Rate Models

Formulas

Value: V = V_swap(K) ± V_swaption(K)
Cancel: payer swap + receiver swaption = payer swap cancelable by the payer