Affiliations: Division of Mathematical Sciences, School of Physical and Mathematical Sciences, Nanyang Technological University, SPMS-MAS, Nanyang, Singapore. E-mail: [email protected] | Department of Mathematics, Ateneo de Manila University, Loyola Heights, Quezon City, Philippines. E-mail: [email protected]
Note: [] Address for correspondence: Nicolas Privault, Division of Mathematical Sciences, School of Physical and Mathematical Sciences, Nanyang Technological University, SPMS-MAS, 21 Nanyang Link, Singapore 637371. E-mail: [email protected].
Abstract: In this paper we review the hedging of interest rate derivatives priced under the risk-neutral measure, and we compute self-financing hedging strategies for various derivatives using the Clark–Ocone formula.
Keywords: Bond markets, hedging, infinite-dimensional analysis, Clark–Ocone formula, swaptions, bond options, caplets
