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Convexity adjustment and delivery option in Australian dollar 90 Day Bills Futures

Author

Listed:
  • Marc Henrard

    (Bank for International Settlements)

Abstract

Australian 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.

Suggested Citation

  • Marc Henrard, 2005. "Convexity adjustment and delivery option in Australian dollar 90 Day Bills Futures," Finance 0509027, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0509027 Note: Type of Document - pdf; pages: 6. Draft version, comments welcome
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    File URL: http://econwpa.repec.org/eps/fin/papers/0509/0509027.pdf
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    References listed on IDEAS

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    Cited by:

    1. Leccadito, Arturo & Tunaru, Radu S. & Urga, Giovanni, 2015. "Trading strategies with implied forward credit default swap spreads," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 361-375.

    More about this item

    Keywords

    Australian dollar bills futures; convexity adjustment; delivery option; HJM one-factor model.;

    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

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