Hedging long-dated interest rate derivatives for Australian pension funds and life insurers

Kevin Fergusson and Eckhard Platen ()
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Kevin Fergusson: Curtin University

Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: Many pension funds and life insurers seek to hedge their exposure to low interest rates using long-dated interest rate derivatives. This paper extends an approach of Platen and Heath 2006 to price and hedge long-dated interest rate derivatives using a combination of Australian cash, bonds and equities and under a variety of market models. The results show the models under which the lowest cost hedge is achieved.

Keywords: growth optimal portfolio; benchmark approach; long-dated zero coupon bonds; minimal market model (search for similar items in EconPapers)
Pages: 16 pages
Date: 2014-01-01
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Citations: View citations in EconPapers (5)

Published as: Fergusson, K. and Platen, E., 2014, "Hedging long-dated interest rate derivatives for Australian pension funds and life insurers", Australian Journal of Actuarial Practice, 1, 29-44.

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Persistent link: https://EconPapers.repec.org/RePEc:uts:ppaper:2014-7

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