Hedging the Asset Swap. Jiakou Wang. of the JGB Floating Rate Notes. Presentation at SooChow University March 2009. Contents. 1. Introduction. 2. Pricing the ASW. 3. Hedging the ASW. 4. Conclusion. Bond Investor. Interest rate risk. Credit risk. Asset Swap.
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of the JGB Floating Rate Notes
Presentation at SooChow University March 2009
2. Pricing the ASW
3. Hedging the ASW
Interest rate risk
Credit riskAsset Swap
Libor + s
ClientThe JGB FRN Asset Swap
JGB FRN floating coupon
How to price the FRN asset swap?
What are the risks of the FRN asset swap?
What are the proper hedging instruments?
What are the functions of Interest Rate Model ?
Fitting the interest rate curve and the volatility surface
Fitting the swaption volatility surface to get
Fitting the ATM volatility trace (backbone) to get
Build the bond yield curve on today’s market to calculate the forward yieldCalibrating the SABR Model
Managing Smile Risk, Patrick S. Hagan, Deep Kumar etc.
Calculate implied volatility
Fitting volatility curve
Build JGB curvePricing FRN Asset Swap
Interest Rate risk
2.Other risks depending on the modelThe Risks of FRN Asset Swap