Immunizing Foreign Exchange Contracts Against Swap Rate and Volatility Risks
作者:
Mark B. Garman,
期刊:
Journal of International Financial Management&Accounting
(WILEY Available online 1989)
卷期:
Volume 1,
issue 1
页码: 41-54
ISSN:0954-1314
年代: 1989
DOI:10.1111/j.1467-646X.1989.tb00003.x
出版商: Blackwell Publishing Ltd
关键词: foreign exchange;currency options;swap rate;maturity gaps;immunization;volatility
数据来源: WILEY
摘要:
AbstractSwap rate risk, also called the problem of' “maturity gaps,” originates from foreign currency holdings whenever the involved contracts have differing maturities. Such differing maturities give rise to a sensitivity of the portfolio values with respect to the “swap rate,” or differential between the relative interest rates in two countries. Volatility risk, which typically affects only currency contracts having asymmetric payoffs (such as currency options), gives rise to a sensitivity of portfolio values with respect to changes in the exchange rate volatility. In this article we show how currency portfolios may beimmunized, or made insensitive, to both swap rate risk and volatility risk, in the sense of Macaulay's (1938) classical treatment of interest rate risk. The European currency option contract is the primary subject of our discussion, since we show that both ordinary forward contracts and other complicated currency contracts are equivalent to suitable combinations of European currency
点击下载:
PDF
(665KB)
返 回