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Interest Rate Dynamics, Derivatives Pricing, and Risk Management

There are two types of tenn structure models in the literature: the equilibrium models and the no-arbitrage models. And there are, correspondingly, two types of interest rate derivatives pricing fonnulas based on each type of model of the tenn structure. The no-arbitrage models are characterized by...

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Bibliographic Details
Main Author: Chen, Lin
Format: eBook
Language:English
Published: Berlin, Heidelberg Springer Berlin Heidelberg 1996, 1996
Edition:1st ed. 1996
Series:Lecture Notes in Economics and Mathematical Systems
Subjects:
Economics
Finance
Management Science
Economics, General
Finance, General
Online Access:
Collection: Springer Book Archives -2004 - Collection details see MPG.ReNa
Table of Contents:
  • 1 A Three-Factor Model of the Term Structure of Interest Rates
  • 1.1 Introduction
  • 1.2 The Model
  • 1.3 Benchmark Case
  • 1.4 Green’s Function
  • 1.5 Derivatives Pricing
  • 1.6 The Term Structure of Interest Rates
  • 1.7 Expected Future Short Rate
  • 1.8 Forward Rates
  • 2 Pricing Interest Rate Derivatives
  • 2.1 Introduction
  • 2.2 Bond Options
  • 2.3 Caps, Floors, and Collars
  • 2.4 Futures Price and Forward Price
  • 2.5 Swaps
  • 2.6 Quality Delivery Options
  • 2.7 Futures Options
  • 2.8 American Options
  • 3 Pricing Exotic Options
  • 3.1 Introduction
  • 3.2 Green’s Function in the Presence of Boundaries
  • 3.3 Derivatives with Payoffs at Random Times
  • 3.4 Barrier Options
  • 3.5 Lookback Options
  • 3.6 Yield Options
  • 4 Fitting to a Given Term Structure
  • 4.1 Introduction
  • 4.2 Merging to the Heath-Jarrow-Morton Framework
  • 4.3 Whole-Yield Model
  • 5 A Discrete-Time Version of the Model
  • 5.1 Introduction
  • 5.2 Construction of the Four-Dimensional Lattice
  • 5.3 Applications
  • 6 Estimation of the Model
  • 6.1 Introduction
  • 6.2 Kaiman Filter
  • 6.3 Maximum Likelihood
  • 6.4 Method of Moments
  • 6.5 Simulated Moments
  • 7 Managing Interest Rate Risk
  • 7.1 Introduction
  • 7.2 Generalized Duration and Convexity
  • 7.3 Hedging Ratios
  • 7.4 Hedging: General Approach
  • 7.5 Hedging Yield Curve Risk
  • 8 Extensions of the Model
  • 8.1 Introduction
  • 8.2 Extension I: Jumping Mean and Diffusing Volatility
  • 8.3 Extension II: Jumping Mean and Jumping Volatility
  • 9 Concluding Remarks
  • A Proof of Lemma 1
  • B Proof of Proposition 2
  • C Proof of Lemma 2
  • D Proof of Proposition 8
  • E Integral Equation for Derivative Prices

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