Pricing Asian-style interest rate swaps

Chuang Chang Chang, San Lin Chung

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


This research uses an extended Vasicek term structure model to derive closed-form solutions for Asian-style interest rate swaps, whose payoffs are determined by the average interest rates over a period between two consecutive settlement dates. The authors illustrate the pricing properties of Asian-style interest rate swaps and compare them with those of standard interest rate swaps. They show that an Asian-style interest rate swap does not necessarily cost less than a conventional interest rate swap in this framework. The key factors that make the swap rates of Asian-style and standard interest rate swaps different are the shape of the initial term structure of interest rates and the length of reset periods.

Original languageEnglish
Pages (from-to)45-55
Number of pages11
JournalJournal of Derivatives
Issue number4
StatePublished - 1 Jun 2002


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