재무연구 제 권 호 (2008년 11월)
Asian Review of Financial Research, Vol., No..
pp.858~894
pp.858~894
The Valuation of Range Notes under Affine Term Structure Models
Bong-Gyu Jang Department of Industrial and Management Engineering, POSTECH, Pohang, Korea.
Ji hee Yoon Department of Mathematical Science, KAIST, Daejeon, Korea.
In this paper, we ?nd analytic formulas for range accrual notes and spread range accrual notes in the context of the a±ne term structure model. Two important implications related to market risk management are derived: Firstly, the hedging strategy for range accrual notes may signi?cantly depend on the choice of the underlying interest rate model. Secondly, the ambiguity of the correlation between underlying interest rates of spread range accrual notes can give a big difficulty to the traders and risk managers on valuing them.
Bong-Gyu Jang
Ji hee Yoon
In this paper, we ?nd analytic formulas for range accrual notes and spread range accrual notes in the context of the a±ne term structure model. Two important implications related to market risk management are derived: Firstly, the hedging strategy for range accrual notes may signi?cantly depend on the choice of the underlying interest rate model. Secondly, the ambiguity of the correlation between underlying interest rates of spread range accrual notes can give a big difficulty to the traders and risk managers on valuing them.
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