Managing swaption portfolio risk under different interest rate regimes

• Main Authors: NEO, Poh Ling, TEE, Chyng Wen
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: derivatives valuation; stochastic volatility models; interest rate markets; swaptions; risk management; portfolio management; pricing and hedging; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5977; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6976/viewcontent/Managing_swaption_portfolio_risk_under_different_interest_rate_regimes.pdf
• Institution: Singapore Management University

Efficient risk managing of swaption portfolios is crucial in the hedging of interest rate exposure. This paper formulates a portfolio risk management framework under stochastic volatility models. The implication of using the right volatility backbone in the stochastic-alpha-beta-rho (SABR) model is...