The risk of a currency swap: a multivariate‐binomial methodology
提出一种多元二项式方法，用于近似货币互换在未来的价值分布，作为蒙特卡洛模拟的快速替代方案，辅助市场风险和信用风险管理。
In general, the risk of a financial instrument on a future valuation date depends on several stochastic variables. In the case of a currency swap, its value on a future date, can be modelled as a function of five stochastic variables. These represent the factors that determine the term structure of interest rates in the two currencies, and the foreign exchange rate between the currencies. The joint‐probability distribution of the relevant variables on the horizon date is approximated by a multivariate‐binomial distribution. The proposed methodology provides a fast and flexible alternative to Monte‐Carlo simulation of the swap value. The distributions of value produced by the method can be employed to assist with both market and credit risk management.