rolling fwd measure#Yuri

(label: fixedIncome, finMath)

 

In my exam Prof Yuri asked about T-fwd measure and the choice of T.

I said T should match the date of cashflow. If a deal has multiple cashflow dates, then we would need a rolling fwd measure.  See [[Hull]

However, for a standard swaption, I said we should use the expiry date of the option. The swap rate revealed on that date would be the underlier and assumed to follow a LogNormal distro under the chosen T-fwd measure.

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