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Textbook: Swaps modeling using Principal Component Analysis
Risk and Asset Allocation, Springer 2005

    Published On 20/03/2011
    Author Name : 
    Attilio Meucci
    Published Date: 
    Tuesday, Jan 4, 2005
    Last Update: 
    Friday, Aug 8, 2008
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    We present PCA applied to the swap market. By setting the problem in the continuum we provide a frequency-based interpretation of the classical "level-slope-hump" principal component factorization. From this we compute the distribution of the swap prices exactly and by means of the duration-convexity approximation.