An Analysis for Pricing and Hedging with Interest Rate options

• Main Authors: You-cheng Chou, 周祐丞
• Other Authors: Shin-hung Lin
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/67824284947015950630

碩士 === 雲林科技大學 === 財務金融系碩士班 === 98 === This article investigates the pricing and hedging with interest rate options in the LIBOR market. First, we use the quotation of market volatility to estimate the implied volatility, and discuss the relation between maturities and volatilities. When the maturity increases, the volatility decreases. Similarly, the volatility increases as the maturity decreases. Next, we investigate the effects on values of interest rate caps and floors for different moneyness. Finally, the market information is applied to evaluate hedging portfolio of interest rate caps with different hedging strategies. Furthermore, we verify hedge performance of the three different hedging portfolios which are replicated by different number of pure discount bonds. In the long run, the analysis shows that the hedging portfolio constructed by the four pure discount bonds with different maturities has the best performance.