Hedging in bond markets by the Clark-Ocone formula
نویسندگان
چکیده
Hedging strategies in bond markets are computed by martingale representation and the choice of a suitable of numeraire, based on the Clark-Ocone formula in a model driven by the dynamics of bond prices. Applications are given to the hedging of swaptions and other interest rate derivatives and we compare our approach to delta hedging when the underlying swap rate is modeled by a diffusion process.
منابع مشابه
Risk-neutral hedging of interest rate derivatives
In this paper we review the hedging of interest rate derivatives priced under a risk-neutral measure, and we compute self-financing hedging strategies for various derivatives using the Clark-Ocone formula.
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