We are happy to announce that our work from last year on interest rate risk has been accepted for presentation at the World Finance Conference. The conference will take place in Buenos Aires (Argentina) on 21-24 July, where we will talk about our geometry paper (and maybe mention our related works).
In this paper we consider the process of interest rate risk management. The yield curve construction is revisited and emphasis is given to aspects such as input instruments, bootstrap and interpolation. For various financial products we present new formulas that are crucial to define sensitivities to changes in the instruments and/or in the curve rates. Such sensitivities are exploited for hedging purposes. We construct the risk space, which eventually turns out to be a curve property, and show how to hedge any product or any portfolio of products in terms of the original curve instruments.
Keywords: Yield curve, hedging, interest rate risk management.
Click here for the full paper.