Swaptions and options

Don M. Chance

Journal of Risk

Abstract: ABSTRACT This article focuses on equity, currency, and commodity swaptions to determine their similarity to standard options on the underlying asset. In most cases these swaptions are shown to be equivalent to a specific quantity of options on the underlying asset. Thus, option pricing models for the underlying asset are appropriate for swaptions. Investors needing thinly traded equity, currency, and commodity swaptions can create them by restructuring options on the underlying. Dealers can offer these swaptions knowing that they can hedge the delta, gamma, and vega risk with standard options on the underlying. Replication can be done statically, thereby greatly simplifying the process.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-risk/2161141/swaptions-and-options (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ4:2161141

Access Statistics for this article

More articles in Journal of Risk from Journal of Risk
Bibliographic data for series maintained by Thomas Paine ().