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-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher … swap use. Exogeneity tests indicate that both decisions are only endogenous to each other for banks that start using swaps … compliance with the interest rate risk regulation. Although hedging motives dominate, we find selective hedging behavior in swap …
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We propose a term structure function, a two-factor variance process and a return process to jointly price SPX and VIX derivatives. The distinctive feature of the variance model is that the factor coefficients are time-varying and they are bonded with the term structure of variance swaps. The...
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This paper presents an extensive test of the Libor Market on the Euro Cap and Swaption market. The deterministic LIBOR market model prices OTC cap exactly and prices OTC swaptions with errors well below two basis points. Tests for the hedging performance show that the deterministic LIBOR market...
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