Choice of one factor interest rate term structure models for pricing and hedging Bermudan swaptions

This paper revisits pricing and hedging differences presented by Z. Guan, et. al., 2008 from a South African context. The Asset Liabilities Management (ALM) departments in large financial institutions are plagued by a number of problems. Among them is the choice of interest rate model for managing the risks associated with mortgage (home loan) repay-ments. This paper will address these problems by comparing various one-factor models, including Hull-White, Black-Karasinski and CIR models for the pricing and hedging of long-term Bermudan Swaptions which resembles mortgage loans in banks' books.

Grantor dc:publisher.institution

School of Economics

Year dc:date.issued

2011

Author dc:creator

• Holilal, Amiel

Advisor dc:contributor.advisor

• Becker, Ronald

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/12619

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/12619