HEDGING FUTURE CASH FLOWS WITH INTEREST-RATE FUTURES CONTRACTS: A DURATION AND CONVEXITY ANALYSIS UNDER THE NELSON & SIEGEL MODEL
Keywords:
Inmunización de portafolios, Riesgo de tasa de interés, Futuros, Valor em riesgo.Abstract
In this paper we present a model to immunize a future stream of assets and liabilities against interest-rate risk by means of futures contracts on government bonds. The hedging strategies derived from the model reduce significantly the market risk. The concepts of dollar duration and dollar convexity play an important role in measuring and controlling interest-rate risk. Specifically, the risk of small or moderate parallel shifts in the term structure of interest rate is controlled, there is no control on other risks. The robustness of the derived strategies is assessed in terms of the methodology of value at risk. An application is addressed by the way of illustration.Downloads
Published
Issue
Section
License
Once the papers have been approved, the authors will assign their copyrights to this Journal. The Copyright Assignment Conditions include:
1. The Mackenzie Administration Journal holds the rights to all the papers published therein through assignment of copyright.
2. The author retains moral rights to the paper, including the right to identify the author whenever the article is published.
3. As of July 1, 2015 RAM adopted the CC-BY license standard (Creative Commons– BY). Authors are allowed to copy, distribute, display, transmit and adapt articles. Authors must attribute to RAM explicitly and clearly an article’s original publication (with reference to the journal’s name, edition, year and pages in which the article was originally published), yet without suggesting that RAM endorses the author or its use of the article. Contents are released by means of the CC-BY license to fully inter-operate with a variety of different systems and services, including for commercial purposes. In case of an article’s reuse or distribution, authors must make the article’s licensing terms clear to third parties. CC-BY criteria follow open access policies by major OA (Open Access) publishers and journals, such as PLoS, eLife, Biomed Central and Hindawi, among others.
4. When formally requested by the author, this Journal may allow the paper to be published as a chapter or part of a book. The only requirement is that prior publication in this Journal (Journal name, issue, year and pages) must be clearly and explicitly shown as a reference.
