Interest rate option hedging portfolios without bank account
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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.
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2021 ◽
Vol ahead-of-print
(ahead-of-print)
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2018 ◽
Vol 32
(5)
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pp. 23-25
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2014 ◽
Vol 10
(2)
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pp. 135-154
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2017 ◽
Vol 23
(5)
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pp. 869-880
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