The Relative Valuation of Caps and Swaptions: Theory and Empirical Evidence
利用利率期限结构模型，从无套利关系出发研究上限期权与互换期权的相对定价，发现互换期权价格由四个因子驱动、隐含相关性低于历史相关性，且长期互换期权在1998年对冲基金危机期间存在显著错误定价。
ABSTRACT Although traded as distinct products, caps and swaptions are linked by no‐arbitrage relations through the correlation structure of interest rates. Using a string market model, we solve for the correlation matrix implied by swaptions and examine the relative valuation of caps and swaptions. We find that swaption prices are generated by four factors and that implied correlations are lower than historical correlations. Long‐dated swaptions appear mispriced and there were major pricing distortions during the 1998 hedge‐fund crisis. Cap prices periodically deviate significantly from the no‐arbitrage values implied by the swaptions market.