Equity quantile upper and lower swaps
AbstractWith an interest in keeping the cost of carry at acceptable levels for the expression of a positive or negative view on an equity asset over the longer term, a variation to equity default swaps is introduced that fixes the barrier at a given quantile. The barrier level for the stock price then slides upward or downward with respect to maturity depending on whether it has an upper or a lower barrier. The pricing of such sliding barrier swaps is made possible using Markov chain approximations as developed by Mijatović and Pistorius. The pricing and hedging of such swaps is illustrated with respect to a variety of hedging criteria for the variance gamma (VG) and CGMY LÃ©vy processes calibrated to S&P 500 index options. It is envisaged that such securities could be useful in permitting investors to express a long-term view on various economic sectors by writing such Equity Quantile Upper And Lower Swaps, or EQUALS for short.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 12 (2012)
Issue (Month): 1 (October)
Contact details of provider:
Web page: http://www.tandfonline.com/RQUF20
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.