Monthly Archives: December 1995

Convexity Adjustment for Constant Maturity Swaps

Both CMS (Constant Maturity Swap) and LIBOR-in-arrears swaps have payments that are linear with respect to an index while the offsetting hedges are convex. The linearity of the payment (relative to the convex hedges) imposes a cost that requires a … Continue reading

Posted in Publications and Papers, Valuation and Modeling | Tagged | Leave a comment