Tid: 11 december 2006 kl 09.15-10.00 (Observera tiden)

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Mattia Ferrini och Valentino Grassi

Titel: Pricing Plain-Vanilla and Exotic Callable Bonds. (Examensarbete)

Sammanfattning: Fixed Income instruments are investments which provide a return in the form of fixed periodic payments and a capital gain on the principal amount at maturity. Callable bonds are Fixed Income securities which give the issuer the right to refinance his debts at a lower cost in case of falling interest rates.

Higher market complexity, the evolution of transaction technologies and higher professionalism among investors have reduced margins and arbitrage opportunities. The result is a growing interest for more accurate pricing models for Callable bonds.

In this thesis we discuss, implement and calibrate the Hull-White extended Vasicek and the G2++ model, which we compare by pricing plain-vanilla as well as Callable bonds paying IR-curve spread dependent payoffs. In order to price FX hybrid callable bonds, we introduce a one-factor and a two-factor model, which are compared in the thesis in terms of pricing accuracy. Sensitivity analysis tests are also carried out in order to test the stability of the introduced models.

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