Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40182
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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.publisher|aHfB, Business School of Finance and Management |cFrankfurt, M.en_US
dc.relation.ispartofseries|aCPQF Working Paper Series |x4en_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.stwVolatilitäten_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwTheorieen_US
dc.titleInterest rate convexity and the volatility smileen_US
dc.type|aWorking Paperen_US
dc.identifier.ppn829980660en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cpqfwp:4-

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