Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
978291 | Physica A: Statistical Mechanics and its Applications | 2007 | 19 Pages |
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.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
Belal E. Baaquie, Cui Liang, Mitch C. Warachka,