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dc.contributor.authorBoenkost, Wolframen_US
dc.contributor.authorSchmidt, Wolfgang M.en_US
dc.date.accessioned2010-09-09en_US
dc.date.accessioned2010-09-24T09:04:09Z-
dc.date.available2010-09-24T09:04:09Z-
dc.date.issued2006en_US
dc.identifier.urihttp://hdl.handle.net/10419/40182-
dc.description.abstractWhen pricing the convexity effect in irregular interest rate derivatives such as, e.g., Libor-in-arrears or CMS, one often ignores the volatility smile, which is quite pronounced in the interest rate options market. This note solves the problem of convexity by replicating the irregular interest flow or option with liquidly traded options with different strikes thereby taking into account the volatility smile. This idea is known among practitioners for pricing CMS caps. We approach the problem on a more general scale and apply the result to various examples.en_US
dc.language.isoengen_US
dc.publisherHfB, Business School of Finance and Management Frankfurt, M.en_US
dc.relation.ispartofseriesCPQF Working Paper Series 4en_US
dc.subject.jelG13en_US
dc.subject.ddc330en_US
dc.subject.keywordinterest rate optionsen_US
dc.subject.keywordvolatility smileen_US
dc.subject.keywordconvexity,en_US
dc.subject.keywordoption replicationen_US
dc.subject.stwZinsen_US
dc.subject.stwVolatilit├Ąten_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwTheorieen_US
dc.titleInterest rate convexity and the volatility smileen_US
dc.typeWorking Paperen_US
dc.identifier.ppn516165224en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cpqfwp:4-
Appears in Collections:CPQF Working Paper Series, Frankfurt School of Finance and Management

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