Overnight Indexed Swaps and Floored Compounded Instrument in HJM One-Factor Model
AbstractTwo 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 InfoPaper provided by EconWPA in its series Finance with number 0402008.
Date of creation: 09 Feb 2004
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Overnight indexed swaps; option on OIS; Asian option; compounded average; explicit formula; HJM model; one factor model; hedging;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-15 (All new papers)
- NEP-CFN-2004-02-15 (Corporate Finance)
- NEP-FIN-2004-02-15 (Finance)
- NEP-RMG-2004-02-15 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marc Henrard, 2003. "Explicit bond option and swaption formula in Heath-Jarrow-Morton one factor model," Finance 0310009, EconWPA.
- Henrard, Marc, 2007. "The irony in the derivatives discounting," MPRA Paper 3115, University Library of Munich, Germany.
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