IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpfi/0402008.html
   My bibliography  Save this paper

Overnight Indexed Swaps and Floored Compounded Instrument in HJM One-Factor Model

Author

Listed:
  • Marc Henrard

    (Bank for International Settlements)

Abstract

Two types of financial instruments including (overnight) compounding are studied in this note. The first one is overnight compounded instruments in the case where the settlement is delayed with respect to the end of the compounding period (floating leg of the OIS). The second is options on the composition. In both cases we study both continuous and discrete composition. We provide explicit formulas within the HJM one-factor models with deterministic volatility together with hedging strategies.

Suggested Citation

  • Marc Henrard, 2004. "Overnight Indexed Swaps and Floored Compounded Instrument in HJM One-Factor Model," Finance 0402008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0402008
    Note: Type of Document - LaTeX; prepared on Linux; to print on ??;
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0402/0402008.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marc Henrard, 2003. "Explicit bond option and swaption formula in Heath-Jarrow-Morton one factor model," Finance 0310009, University Library of Munich, Germany.
    2. Marc Henrard, 2003. "Explicit Bond Option Formula In Heath–Jarrow–Morton One Factor Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 57-72.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sander Willems, 2020. "SABR smiles for RFR caplets," Papers 2004.04501, arXiv.org, revised May 2020.
    2. Henrard, Marc, 2007. "The irony in the derivatives discounting," MPRA Paper 3115, University Library of Munich, Germany.
    3. Marc Pierre Henrard, 2019. "LIBOR Fallback and Quantitative Finance," Risks, MDPI, vol. 7(3), pages 1-15, August.
    4. Claudio Fontana, 2022. "Caplet pricing in affine models for alternative risk-free rates," Papers 2202.09116, arXiv.org, revised Jan 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bünyamin Erkan & Jean-Luc Prigent, 2020. "About Long-Term Cross-Currency Bermuda Swaption Pricing," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 239-262, June.
    2. Henrard, Marc, 2006. "TIPS Options in the Jarrow-Yildirim model," MPRA Paper 1423, University Library of Munich, Germany.
    3. Henrard, Marc, 2006. "Bonds futures and their options: more than the cheapest-to-deliver; quality option and marginning," MPRA Paper 2001, University Library of Munich, Germany.
    4. Marc Henrard, 2005. "Bermudan swaptions in Hull-White one-factor model: analytical and numerical approaches," Finance 0505023, University Library of Munich, Germany.
    5. Ingo Beyna, 2013. "Interest Rate Derivatives," Lecture Notes in Economics and Mathematical Systems, Springer, edition 127, number 978-3-642-34925-6, October.
    6. Marc Henrard, 2005. "Inflation bond option pricing in Jarrow-Yildirim model," Finance 0510027, University Library of Munich, Germany.
    7. Henrard, Marc, 2007. "CMS swaps in separable one-factor Gaussian LLM and HJM model," MPRA Paper 3228, University Library of Munich, Germany.
    8. Marcin Dec, 2019. "Markovian and multi-curve friendly parametrisation of a HJM model used in valuation adjustment of interest rate derivatives," Bank i Kredyt, Narodowy Bank Polski, vol. 50(2), pages 107-148.
    9. Henrard, Marc, 2006. "Bonds futures: Delta? No gamma!," MPRA Paper 2249, University Library of Munich, Germany, revised 01 May 2006.
    10. Marc Henrard, 2006. "A Semi-Explicit Approach to Canary Swaptions in HJM One-Factor Model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(1), pages 1-18.
    11. Ingo Beyna & Carl Chiarella & Boda Kang, 2012. "Pricing Interest Rate Derivatives in a Multifactor HJM Model with Time," Research Paper Series 317, Quantitative Finance Research Centre, University of Technology, Sydney.
    12. Marc Henrard, 2004. "Semi-explicit Delta and Gamma for European swaptions in Hull- White one factor model," Finance 0411036, University Library of Munich, Germany, revised 25 Jan 2005.

    More about this item

    Keywords

    Overnight indexed swaps; option on OIS; Asian option; compounded average; explicit formula; HJM model; one factor model; hedging;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0402008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.