Convexity adjustment and delivery option in Australian dollar 90 Day Bills Futures
AbstractAustralian dollar bills futures are very particular, not only on the valuation at expiry but also for the maturity delivery option and the credit delivery option. This note consider only the interest rate part of the futures (marginning and maturity delivery option). An explicit formula for the convexity adjustment realted to the marginning in the HJM gaussian model is proposed. The delivery option is also studied but found to be (almost) worthless. Copyright (c) 2005 by Marc Henrard.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0509027.
Length: 6 pages
Date of creation: 27 Sep 2005
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Australian dollar bills futures; convexity adjustment; delivery option; HJM one-factor model.;
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-2005-10-04 (All new papers)
- NEP-FIN-2005-10-04 (Finance)
- NEP-MAC-2005-10-04 (Macroeconomics)
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