Rainbow options - Eric Benhamou
to lock up the implied correlation. Proper delta-hedging enables also to lock up the historical covariance. Rainbow option offers the additional advantage to provide a …
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Swaps: Constant maturity swaps (CMS) and …
www.ericbenhamou.netSwaps: Constant maturity swaps (CMS) and constant maturity Treasury (CMT) swaps A Constant Maturity Swap (CMS) swap is a swap where one of the legs pays
Total return swaps (TRS) - Eric Benhamou
www.ericbenhamou.netTotal return swaps (TRS) DEFINITION Total return swap is the generic name for a bilateral financial contract where one party, the total return payer, agrees to make floating payment equal to the
lambda (options leverage) - Eric Benhamou
www.ericbenhamou.netlambda (options leverage) INTRODUCTION The lambda (option leverage) is defined as the percentage change in an option price divided by …
Accrued interest and day count conventions - Eric …
www.ericbenhamou.netAccrued interest and day count conventions The terminology of accrued interest originally refers to bond valuation, although it has been extended to swaps and more generally to fixed income
Delta risk on interest rate derivatives - Eric Benhamou
www.ericbenhamou.netDelta risk on interest rate derivatives The concept of delta risk on interest rate derivatives is a generalization of the traditional one of a single asset option.
Fixed income markets (overview) - Eric Benhamou
www.ericbenhamou.netFixed income markets (overview) Fixed income markets encompass all interest rate financial instruments, like a bond, money market instrument, swaps, caps floors, swaptions and more
Non standard interest rate caps and floors - Eric …
www.ericbenhamou.netNon standard interest rate caps and floors Non standard interest rate caps and floors have been developed by marketers and financial engineers to respond to the need ...
Barings bank (risk management disaster) - Eric …
www.ericbenhamou.netBarings bank (risk management disaster) The story of the Barings is one of a rogue trader that alone caused the bankruptcy of a supposed solid bank.
Over-the-counter (OTC) options market conventions
www.ericbenhamou.netIn the swap markets, the quotation of a “Plain vanilla” fixed versus floating interest rate swap deals is based on the fixed rate. If the swap does not follow
Swaps: basis swaps - Eric Benhamou
www.ericbenhamou.netbetween the JPY normal bootstrapped interest rate curve and the basis swap interest rate curve to quantify the basis swap market effect. Jpy Libor curve and spread curve used to account for the basis swap market. One has first to create the normal interest rate swap curve by
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