Bonds futures: Delta? No gamma!
Bond futures are liquid but complex instruments. Here they are analysed in a one-factor Gaussian HJM model. The in-the-model delta and out-of-the-model delta and gamma are studied. An explicit formula is provided for in-the-model delta. The out-of-the-model delta and gamma are equivalent to partial derivatives with respect to discount factors. In particular cases the derivative can not be obtained by standard techniques. The same situations lead to cases where the gammas (second order partial derivatives) do not exists.
|Date of creation:||12 Apr 2006|
|Date of revision:||01 May 2006|
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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.:
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992.
"Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation,"
Econometric Society, vol. 60(1), pages 77-105, January.
- David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305 World Scientific Publishing Co. Pte. Ltd..
- Marc Henrard, 2006. "A Semi-Explicit Approach to Canary Swaptions in HJM One-Factor Model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(1), pages 1-18.
- Henrard, Marc, 2006. "Bonds futures and their options: more than the cheapest-to-deliver; quality option and marginning," MPRA Paper 2001, University Library of Munich, Germany.
- Marc Henrard, 2003. "Explicit bond option and swaption formula in Heath-Jarrow-Morton one factor model," Finance 0310009, EconWPA.
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