Recently CME announced the introduction of a new interest rate swap future. The future delivers an interest rate swap at expiry which is then cleared through CME. The contract uses the usual future style margining.
This week I had a quick look at the valuation of the contract. The existing machinery developed by Marc Henrard to value bond futures was applicable to cash settled swap futures and can also be applied to this new contract. I have sketched some initial results below;
Update 18th Oct 2012: Marc Henrard has recently written a detailed paper, Deliverable Interest Rate Swap Futures: Pricing in Gaussian HJM Model
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You might want to delete the “Hello world” blog post via your wordpress dashboard, BTW.
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