Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia
![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
Swaptions and options
Don M. Chance
Abstract
ABSTRACT
This article focuses on equity, currency, and commodity swaptions to determine their similarity to standard options on the underlying asset. In most cases these swaptions are shown to be equivalent to a specific quantity of options on the underlying asset. Thus, option pricing models for the underlying asset are appropriate for swaptions. Investors needing thinly traded equity, currency, and commodity swaptions can create them by restructuring options on the underlying. Dealers can offer these swaptions knowing that they can hedge the delta, gamma, and vega risk with standard options on the underlying. Replication can be done statically, thereby greatly simplifying the process.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net