New valuation formulae for financial contracts set to revolutionize markets!
The article discusses how to calculate the value of different financial contracts like interest rate swaps, foreign exchange options, and credit default swaps. The researchers use a mathematical tool called Ito calculus to derive formulas for these contracts. They show how to adjust for timing differences in interest rate swaps and how to value contracts involving both foreign and domestic currencies. The key finding is that these contracts can be valued using Black-Scholes type formulas with specific adjustment terms.