Interest-rate option models: understanding, analysing and using models for exotic interest-rate options
An accessible, first-rate overview of interest rate dependent options for traders and institutional investors Until now market professionals seeking to exploit the profit potential of interest rate dependent options were forced to hunt through esoteric journals for a crumb or two of practical knowledge about their use. This accessible book narrows the information gap. Written in easy-to-follow, non-technical language, it logically reviews all the most commonly used interest rate option models, showing how each one can be applied and implemented for specific market applications. DR. RICARDO REBONATO (London, England) is head of Research, Debt Capital Markets at Barclays de Zoete Wedd Ltd.
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Definition and valuation of the underlying instruments
a statistical approach
A motivation for yield curve models
15 other sections not shown
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American options arbitrage asset assumptions BDT model bond option Brownian Brownian motion calibration cap prices caplet Chapter CIR model coefficients contingent claim correlation covariance covariance matrix depend derivative described deterministic different maturities discount bond maturing discount bond prices discount function distribution drift dynamics estimation European swaptions evaluation expectation expiry Figure forward contract functional form future given Green's functions hedging HJM approach Hull and White HW model implementation implied instantaneous forward rate instruments integral interest-rate intuitively Ito's lemma lattice log-normal log-normally distributed market price martingale money market account Notice numeraire obtained one-factor model option pricing parameters payoff plain-vanilla portfolio price of risk probability procedure quantities realisation relative price reversion speed short rate short-rate process shown specific spot rate stochastic stochastic differential equation structure of volatilities swap rate term structure tree two-factor underlying variables variance Vasicek Vasicek model vector Wiener processes yield curve zero