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A simple solution for sticky cap and sticky floor

By Roberto Baviera

Abstract

We show an analytical approach to sticky cap and sticky floor according to the Bond Market Model, a recently introduced version of the multi-factor Gaussian Heath-Jarrow-Morton model that is particularly easy to manage and calibrate. This solution allows having a comprehensive approach even for this class of Interest Rates' exotic derivatives that are fully path-dependent.Sticky cap; Sticky floor, Bond Market Model,

DOI identifier: 10.1080/14697680600999377
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