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| Title: | An essay on exotic floaters |
| Authors: | Choi, Chi Hung |
| Issue Date: | 2002 |
| Abstract: | This essay studies three exotic floaters: capped floater, average rate floater and one-way floater. We first study the product structure and economics of capped floater and valuate fair level of yield enhancement of capped floater assuming the underlying interest rate process follows the one-factor no-arbitrage Hull-White (HW) model. Comparative-static analysis of interest spread of capped money market account (MMA) is conducted. We then propose a new twist to a LIBOR-in-arrears swap: average rate floater whose coupon rate is based on the average of several fixings. We describe the characteristics and the benefits of average rate floater and apply the technique of valuing a LIBOR-in-arrears swap to valuate this floater. Finally, we discuss the origin and rationales of one-way floater and use the Monte Carlo simulations to estimate the magnitude of the interest spread of one-way floater employing the Brace-Gatarek-Musiela (BGM) interest rate model. All models in this essay have been calibrated using the data of Hong Kong’s capital markets. |
| Description: | Thesis (M.Phil.)--Hong Kong University of Science and Technology, 2002
viii, 74 leaves : ill. ; 30 cm
HKUST Call Number: Thesis FINA 2002 Choi |
| URI: | http://hdl.handle.net/1783.1/4777 |
| Appears in Collections: | FINA Master Theses
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