The convexity adjustment is from a par bond specified by • three year maturity, • annual coupon, set equal to the initial forward swap rate, • yield-to-maturity equal to the coupon rate. The initial forward swap rate is also quanto adjusted. We note that the correlation used in the spreadsheet is between the FRF to SEK exchange rate and the SEK swap rate.

The Black-Karasinski model is a short rate model that assumes the short-term interest rates to be log-normally distributed. We implement the one factor Black-Karasinski model as a binomial or trinomial tree.

Variable rate swap is an interest rate swap that has two legs: one fixed rate leg and a variable rate leg. The variable leg involves fixed rate payments for an initial period of time and a floating rate for the rest. The floating rate on that portion is defined as a minimum of two index rates. The fixed rate leg is similar to a fixed rate bond.

A constant maturity swap (CMS) spread option makes payments based on a bounded spread between two index rates (e.g., a GBP CMS rate and a EURO CMS rate). We assume that both the forward GBP and EURO CMS rates follow geometric Brownian motion under their respective T-forward measures.