Pricing of range accrual swap in the quantum finance Libor Market Model

•The range accrual swap is modelled in the framework of Quantum Finance and the approximate price is obtained using an expansion in the Libor volatility.•The price of accrual swap is numerically analysed by generating daily sample values of a two dimension Gaussian quantum field.•The Monte Carlo simulation method is used to study the nonlinear domain of the model and determine the range of validity of the approximate formula.

We study the range accrual swap in the quantum finance formulation of the Libor Market Model (LMM). It is shown that the formulation can exactly price the path dependent instrument. An approximate price is obtained as an expansion in the volatility of Libor. The Monte Carlo simulation method is used to study the nonlinear domain of the model and determine the range of validity of the approximate formula. The price of accrual swap is analyzed by generating daily sample values by simulating a two dimension Gaussian quantum field.