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Calibration and Pricing in a Multi-Factor Quadratic Gaussian Model

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  • Samson Assefa

Abstract

We consider a two-country multi-factor quadratic Gaussian model and provide efficient formulas for the price of default free bonds and the calibration of the model to the default free discount term structure. We also provide approximations for the price of default free swaptions in such a model indicating the limitation of using an approach based on replacing certain martingales by their expectation.

Suggested Citation

  • Samson Assefa, 2007. "Calibration and Pricing in a Multi-Factor Quadratic Gaussian Model," Research Paper Series 197, Quantitative Finance Research Centre, University of Technology, Sydney.
    • Handle: RePEc:uts:rpaper:197
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    File URL: https://www.uts.edu.au/sites/default/files/qfr-archive-02/QFR-rp197.pdf
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    1. Samson Assefa, 2007. "Pricing of Defaultable Securities in a Multi-Factor Quadratic Gaussian Model," Research Paper Series 202, Quantitative Finance Research Centre, University of Technology, Sydney.

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