Pricing and Hedging of Chinese Interest Rate Derivatives

Author: Zheng Zhenlong, Kang Chaofeng
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Publish Date: 2006-07-01
Features: This book first introduces the basic interest rate derivatives at home and abroad in sequence, the theoretical basis and basic methods of describing interest rate dynamics using stochastic processes, basic continuous interest rate models and discrete interest rate models, and the estimation methods of discrete interest rate models. Then, it summarizes the general principles of pricing and hedging interest rate derivatives. Next, using the BDT model as a benchmark and employing tools such as MATLAB and Excel, it conducts pricing and hedging analysis on the callable and puttable bonds issued by the China Development Bank, as well as interest-rate-linked structured deposits issued by commercial banks in recent years. Later, after examining the impact of options on interest rate risk measurement techniques, it provides an in-depth analysis of interest rate risk measurement for bonds with embedded options and demonstrates the influence of embedded options on banks' interest rate risk management.