Hedging Asian Bond Options with Malliavin Calculus Under Stochastic String Models

Bueno-Guerrero, Alberto; Moreno, Manuel; Navas, Javier F.

doi:10.1007/978-3-319-95285-7_10

Cited by 2 publications

(2 citation statements)

References 11 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…These kinds of options include standard calls and puts caps and swaptions. We have also proven that this property also holds for barrier options, and Bueno-Guerrero et al (2018) show that it is also valid for Asian options. Moreover, we have made calculations not explicated here, with other exotic options, such as power, call on max, call on call and log options, giving all of them as a result the equality X ¼ D t;TÀt X s t;TÀt ð Þ 1 T¼t , and, therefore, hedging portfolios without a bank account part.…”

Section: Hedging Portfolios With a Non-zero Bank Account Partsupporting

confidence: 56%

See 1 more Smart Citation

Interest rate option hedging portfolios without bank account

Bueno-Guerrero¹

2019

SEF

Self Cite

View full text Add to dashboard Cite

Purpose This paper aims to study the conditions for the hedging portfolio of any contingent claim on bonds to have no bank account part. Design/methodology/approach Hedging and Malliavin calculus techniques recently developed under a stochastic string framework are applied. Findings A necessary and sufficient condition for the hedging portfolio to have no bank account part is found. This condition is applied to a barrier option, and an example of a contingent claim whose hedging portfolio has a bank account part different from zero is provided. Originality/value To the best of the authors’ knowledge, this is the first time that this issue has been addressed in the literature.

show abstract

Section: Hedging Portfolios With a Non-zero Bank Account Partsupporting

confidence: 56%

“…It is now natural to wonder if we can have this property for options that do not belong to the class (4). In Bueno-Guerrero et al (2018), it has been proven that four types of Asian options share this feature. We will tackle here with another example of path-dependent option, namely, a barrier option.…”

Section: Hedging Portfolios Without Bank Accountmentioning

confidence: 98%