Pricing inflation-indexed swaps and swaptions using an hjm model


Thesis Type: Post Graduate

Institution Of The Thesis: Middle East Technical University, Turkey

Approval Date: 2009

Thesis Language: English

Student: Zeynep Canan Temiz

Consultant: AZİZE HAYFAVİ

Abstract:

Inflation-indexed instruments provide a real return and protect investors from the erosion of the purchasing power of money. Hence, inflation-indexed markets grow very fast day by day. In this thesis, we focus on pricing of the inflation-indexed swaps and swaptions which are the most liquid derivative products traded in the inflation-indexed markets. Firstly, we review the Hull-White extended Vasicek model in the HJM framework. Then, we use this model to price inflation-indexed swaps. Also, pricing of inflation-indexed swaptions is given using Black’s market model.