Interest rate derivatives
Insurance Risk and BNY Mellon have conducted a survey to look at how insurance companies are preparing for the new regime and the opportunities and challenges that the changes will bring.
More Interest rate derivatives articles
In the Gaussian Heath-Jarrow-Morton model, all discount factors are lognormal under allforward measures. The Libor market model does not have this property – only the relevantforward Libor rate is lognormal under a given forward measure. However, all...
Ingmar Evers and Farshid Jamshidian describe a relatively new product known as a flexi-swap and discuss its application in securitisation. A flexi-swap gives a counterparty an option to amortise the interest rate swap at an accelerated pace. They show...
The Libor Markov-functional model is an interest rate model designed for pricing derivatives with American-style early exercise features. It may be implemented as efficiently as the Vasicek-Hull-White model yet may be calibrated to vanilla option prices...
Litterman & Scheinkman (1991) showed that the term structure of interest rates is reliablymodelled by an affine three-factor model using principal component analysis. Such a modelis inconsistent with no arbitrage. Here, Haim Reisman and Gady Zohar derive...
While swaption prices theoretically contain information on interest rate correlation, Bruce Choy, Tim Dun and Erik Schlögl argue that, for any practical purpose, this information cannot be extracted. Care must therefore be taken when pricing correlation-sensitive...
This paper discusses a number of diverse considerations that risk managers need to incorporate into their thought processes and recurring procedures if they are to fulfill their role more effectively in the future
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