The holder of a reverse floater is entitled to receive the LIBOR L i (T i )
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The holder of a reverse floater is entitled to receive the LIBOR Li(Ti) while pay max(K − Li(Ti), K’) at time Ti+1,i = 1, 2, ··· ,n − 1, with respect to a unit principal, K > 0 and K’ > 0. Using the Lognormal LIBOR Market model as defined by (8.3.10), find the fair value of the reverse floater at time t, t < T0.
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The fair value of a reverse floater can be determined using the Lognormal LIBOR Market model The Log...View the full answer
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