1 / 25

Pricing Hybrid Derivatives in the LIBOR Market Model

Pricing Hybrid Derivatives in the LIBOR Market Model. Hybrid Derivatives. PRDC (Power Reverse Dual Currency) Nikkei 225 Linked Multi-Callable Maturity 20-30 years. Risks in Hybrid derivatives. Volatility skew/smile of underlying Correlation between underlying and interest rates.

stevie
Télécharger la présentation

Pricing Hybrid Derivatives in the LIBOR Market Model

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Pricing Hybrid Derivatives in the LIBOR Market Model

  2. Hybrid Derivatives • PRDC (Power Reverse Dual Currency) • Nikkei 225 Linked Multi-Callable Maturity 20-30 years

  3. Risks in Hybrid derivatives • Volatility skew/smile of underlying • Correlation between underlying and interest rates

  4. Hybrid LIBOR Market Model • Spot FX rate • Domestic Forward LIBOR Rates

  5. Hybrid LIBOR Market Model • Foreign forward LIBOR rates

  6. FX Option Price • Forward FX Rate • FX Call Option Price

  7. Asymptotic Expansion Method • Simple example • Taylor’s series expansion

  8. Asymptotic FX Option Formula • Forward FX rate

  9. Domestic forward LIBOR rates • Foreign forward LIBOR rates

  10. Third order asymptotic expansion of forward FX rate

More Related