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Unspanned stochastic volatility: evidence from hedging interest rate derivatives
Most existing dynamic term structure models assume that interest rate derivatives are redundant securities and can be perfectly hedged using solely bonds. We find that the quadratic term structured models have serious difficulties in hedging caps and cap straddles, even though they capture bond yields well. Furthermore, at-the-money straddle hedging errors are highly correlated with cap-implied volatilities and can explain a large fraction of hedging errors of all caps and straddles cross moneyness and maturities. Our results strongly suggest the existence of systematic unspanned factors related to stochastic volatility in interest rate derivatives markets. .Printed Journal
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| PSB lt.dasar - Pascasarjana | 1 |
| Penerbit | : The American Finance Association |
|---|---|
| Edisi | - |
| Subjek | Interest rates Hedging Volatility Derivatives studies Stochastic models |
| ISBN/ISSN | 221082 |
| Klasifikasi | - |
| Deskripsi Fisik | - |
| Info Detail Spesifik | - |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas | Tidak Ada Data |