PT  - JOURNAL ARTICLE
AU  - Chuang-Chang Chang
AU  - San-Lin Chung
TI  - Pricing Asian-Style Interest Rate Swaps
AID  - 10.3905/jod.2002.319185
DP  - 2002 May 31
TA  - The Journal of Derivatives
PG  - 45--55
VI  - 9
IP  - 4
4099  - https://pm-research.com/content/9/4/45.short
4100  - https://pm-research.com/content/9/4/45.full
AB  - Derivatives with “Asian”-style payoffs are increasingly common, but often challenging to value. An Asian-style swap involves the exchange of interest computed at the average value of a floating rate over the period between settlement dates against a fixed swap rate. In this article, Chang and Chung derive a closed-form valuation equation for Asian swaps under the extended Vasicek interest rate model. In comparing Asian against European swap values, they show that the shape of the initial term structure makes a big difference.