Linear Tsr
Subtype of Pricing MethodCorresponds to the QuantLib LinearTsrPricer.
Prices a cms cash flow using a linear terminal swap rate model.
The slope parameter is linked to a gaussian short rate model as described in the Patrick S. Hagan paper titled "Convexity Conundrums Pricing IRS Swaps, Caps, and Floors". Web reference available here
The cut off point for integration can be set:
- by explicitly specifying the lower and upper bound
- by defining the lower and upper bound to be the strike where a vanilla swaption has 1% or less vega of the atm swaption
- by defining the lower and upper bound to be the strike where undeflated (!) payer resp. receiver prices are below a given threshold.