%0 Journal Article
%T On Valuing Constant Maturity Swap Spread Derivatives
%A Leonard Tchuindjo
%J Journal of Mathematical Finance
%P 189-194
%@ 2162-2442
%D 2012
%I Scientific Research Publishing
%R 10.4236/jmf.2012.22020
%X Motivated by statistical tests on historical data that confirm the normal distribution assumption on the spreads between major constant maturity swap (CMS) indexes, we propose an easy-to-implement two-factor model for valuing CMS spread link instruments, in which each forward CMS spread rate is modeled as a Gaussian process under its relevant measure, and is related to the lognormal martingale process of a corresponding maturity forward LIBOR rate through a Brownian motion. An illustrating example is provided. Closed-form solutions for CMS spread options are derived.
%K CMS Spread
%K Market Model
%K Brownian Motion
%K Forward Measure
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=19217