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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Hedging the Asset Swap
of the JGB Floating Rate Notes
Presentation at SooChow University March 2009
2. Pricing the ASW
3. Hedging the ASW
Interest rate risk
Libor + s
JGB FRN floating coupon
Questions for Lehman
How to price the FRN asset swap?
What are the risks of the FRN asset swap?
What are the proper hedging instruments?
An example of interest rate curve (Bloomberg)
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 yield
Managing Smile Risk, Patrick S. Hagan, Deep Kumar etc.
Calculate the caplet
Calculate implied volatility
Fitting volatility curve
Build JGB curve
Interest Rate risk
2.Other risks depending on the model
Thank You !