This paper derives a pricing model for interest rate swaps when the underlying markets and settlement currency can be set arbitrarily. Using the risk-neutral valuation method developed by Musiela and Rutkowski (Martingale methods in financing modelling, 2nd edn, Springer, New York, 2005), the authors generate arbitrage-free prices for a Levy market. The Levy processes are attractive because they support better statistical fits than a Gaussian economy. A closed-form solution for the swap value results from replicating the payment at each settlement date. The results then show that the domestic and foreign term structures are important factors in the pricing model; the swap value contains a correction term that reflects the currency hedging cost for the correlation between interest rates and the exchange rate.

中文翻译：

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征费市场模型下的交叉货币利率掉期定价

当基础市场和结算货币可以任意设定时，本文推导了利率互换的定价模型。使用Musiela和Rutkowski开发的风险中性估值方法（Martingale的融资建模方法，第二版，Springer，纽约，2005年），作者为征税市场产生了无套利的价格。征费流程之所以具有吸引力，是因为与高斯经济相比，征费流程支持更好的统计拟合。交换价值的封闭式解决方案是在每个结算日复制付款。结果表明，国内外期限结构是定价模型的重要因素。掉期价值包含一个校正项，该校正项反映了利率与汇率之间相关性的货币对冲成本。