Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 20, 2013 erstellt
Description:
This paper provides closed form lower and upper bounds for the price of European swaption on cross currency basis swap with the presence of dynamic basis spreads. Cross currency basis spreads are treated as integrals of spot spreads, approach familiar from interest rate models. The spot spread is modelled by two-factor mean reverting Gaussian model that is equivalent to two-factor Hull-White model introduced by [Hull and White(1994)]. This model allows closed form approximations and relatively well fitting and simple calibration to the spread term structure