The effects of negative interest rates on the estimation of option sensitivities: The impact of switching from a log-normal to a normal model
| Autor: | Martina Mulas, Simone Ligato, Pier Giuseppe Giribone |
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| Rok vydání: | 2017 |
| Předmět: |
media_common.quotation_subject
Interest Rate Cap Valuation Swaption Valuation Derivative (finance) Order (exchange) Normal greeks estimation 0502 economics and business Econometrics Economics 050207 economics Interest Rate Floor Valuation media_common 050208 finance Swaption Actuarial science 05 social sciences hedging problem Log-normal greeks estimation Interest rate Negative interest rates Normal pricing model Interest Rate Cap Valuation Interest Rate Floor Valuation Swaption Valuation Log-normal pricing model Normal pricing model Log-normal greeks estimation Normal greeks estimation Negative interest rates hedging problem Portfolio Rational pricing Greeks Rendleman–Bartter model Log-normal pricing model |
| Zdroj: | International Journal of Financial Engineering. :1750015 |
| ISSN: | 2424-7944 2424-7863 |
| DOI: | 10.1142/s2424786317500153 |
| Popis: | The estimation of partial derivatives of the price in respect to the main financial variables, called Greeks, is an essential task for a trader in order to understand the sensitivity of a derivative to the input of pricing model. The study of the level of reactivity of the mark to market is an essential task to manage properly the market risk of a portfolio. Due to the negative interest rates in Euro Area, the pricing model of interest-rates options (cap, floor and swaption) has been changed from a log-normal to a normal framework. The aim of this paper is to investigate the effects of this model change on the calculation of option sensitivities. |
| Databáze: | OpenAIRE |
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