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Overnight Indexed Swaps and Floored Compounded Instrument in HJM One-Factor Model


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  • Marc Henrard

    (Bank for International Settlements)


Two types of financial instruments including (overnight) compounding are studied in this note. The first one is overnight compounded instruments in the case where the settlement is delayed with respect to the end of the compounding period (floating leg of the OIS). The second is options on the composition. In both cases we study both continuous and discrete composition. We provide explicit formulas within the HJM one-factor models with deterministic volatility together with hedging strategies.

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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0402008.

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Date of creation: 09 Feb 2004
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Handle: RePEc:wpa:wuwpfi:0402008

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Keywords: Overnight indexed swaps; option on OIS; Asian option; compounded average; explicit formula; HJM model; one factor model; hedging;

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  1. Marc Henrard, 2003. "Explicit bond option and swaption formula in Heath-Jarrow-Morton one factor model," Finance 0310009, EconWPA.
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Cited by:
  1. Henrard, Marc, 2007. "The irony in the derivatives discounting," MPRA Paper 3115, University Library of Munich, Germany.


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