Hedging LIBOR Derivatives in a Field Theory Model of Interest Rates

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We investigate LIBOR-based derivatives using a parsimonious field theory interest rate model capable of instilling imperfect correlation between different maturities. Delta and Gamma hedge parameters are derived for LIBOR Caps against fluctuations in underlying forward rates. An empirical illustration of our methodology is also conducted to demonstrate the influence of correlation on the hedging of interest rate risk.
34 pages, 10 figures

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Physics and Society, Pricing of Securities

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http://salesiana.dossiersoluciones.com/handle/123456789/209009

Consulte el texto completo en el siguiente enlace:

https://arxiv.org/abs/physics/0504221
 http://arxiv.org/abs/physics/0504221

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arXiv