TY - JOUR T1 - Cross-Currency Equity Swaps in the BGM Model JF - The Journal of Derivatives SP - 60 LP - 76 DO - 10.3905/jod.2007.699046 VL - 15 IS - 2 AU - Ting-Pin Wu AU - Son-Nan Chen Y1 - 2007/11/30 UR - https://pm-research.com/content/15/2/60.abstract N2 - n equity swap entails a sequence of exchanges of the return on a specified equity portfolio against a payment computed in a different way on the same notional principal. Valuation models exist, but those with a floating leg tied to a short-term interest rate are not so easy to use. The BGM (Brace-Gatarek-Musiela) model is a useful way to model short-rate dynamics for this purpose. Further complications occur when the swap legs are denominated in different currencies and/or notional principal varies over time. In this article, the authors develop very general valuation models for multi-currency equity swaps with floating-leg payoffs based on BGM short rates, as well as possible amortization of notional principal.TOPICS: Derivatives, simulations, fundamental equity analysis ER -