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sanjayc2


Total Posts: 14
Joined: Mar 2008
 
Posted: 2017-07-12 13:40
Hi all, L. Andersen & V. Piterbarg note in their book that American swaptions exercised within a rate reset period exercise into a swap starting the following rate reset date, and their payoff includes an "exercise fee" based on the current Libor reset (with reset date prior to exercise). They note that the "exercise fee" is like an accrued calc (i.e. not discounted). How "standard" a feature is this? They note this makes American options path-dependent (unlike Berms, which are just multi-exercise), and that this can affect their valuation under certain market conditions and trade terms.

Could someone point me to ISDA protocol/definition where this payoff is specified? Where should one look for for this specification in a term sheet, or maybe on ISDA website? (I only have a trade confirm, which is rather brief).

Thanks in advance.

xquant

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-07-20 11:29
I have never ever encountered an "American swaption" product...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

Cheng


Total Posts: 2838
Joined: Feb 2005
 
Posted: 2017-07-21 16:23
That's probably because you don't live in academia...

"He's man, he's a kid / Wanna bang with you / Headbanging man" (Grave Digger, Headbanging Man)

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-07-25 11:01
Right you are, Cheng... Clearly, I need to get out more.

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...
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