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|Title:||Hedging LIBOR derivatives in a field theory model of interest rates|
|Authors:||Baaquie, B.E. |
|Citation:||Baaquie, B.E., Liang, C., Warachka, M.C. (2007-02-01). Hedging LIBOR derivatives in a field theory model of interest rates. Physica A: Statistical Mechanics and its Applications 374 (2) : 730-748. ScholarBank@NUS Repository. https://doi.org/10.1016/j.physa.2006.08.020|
|Abstract:||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 conducted to demonstrate the influence of correlation on the hedging of interest rate risk. © 2006 Elsevier B.V. All rights reserved.|
|Source Title:||Physica A: Statistical Mechanics and its Applications|
|Appears in Collections:||Staff Publications|
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