The Black Model for Interest Rate Derivatives - Essay Example

Only on StudentShare

Extract of sample
The Black Model for Interest Rate Derivatives

Over the last two and half decades, finance has experienced tremendous and exciting developments especially with reference to derivatives markets. One of the reasons explaining the idea of tremendous and exciting developments within financial sector is the fact that both hedger and speculators within financial markets find it attractive to trade derivate specifically assets rather than trading on the assets themselves (Gupta and Subrahmanyam. 2005). Development of derivatives is considered as one of the most successful upcoming within capital markets (Brigo and Mercurio 2001). Within derivatives, there are three main traders; hedger, speculators, and arbitrageurs. Application of derivatives within financial markets helps in eliminating or reducing risk associated with the fluctuations in the prices of assets. Overview and Development of Black Model Financial markets have experienced an increase in the interest-rate contingent claims that include amongst others caps, swaptions, bond options, mortgage-backed securities, as well as captions. The main problem however that is currently experienced is the development of effective and efficient instruments for valuing such contingent claims. Different models have been developed and used in an attempt to find the best and most effective one. ...Show more


The Black Model for Interest Rate Derivatives Institution Date Table of Contents Introduction 2 Overview and Development of Black Model 2 Applications of Black Model in pricing European Options 4 Validity of Black Model 5 Other Applications of Black Model 6 Conclusion 7 Bibliography 8 Introduction The following is a discussion and evaluation of the Black Model for interest rate derivates…
Author : stoltenbergbail
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"The Black Model for Interest Rate Derivatives"
with a personal 20% discount.
Grab the best paper

Related Essays

The effects of interest rate volatilities on the demand of Turkish money
This project studied, particularly the consequences of interest rate volatilities of Turkish Money Demand for the period of 1990-2000. For the completion of the study, quarterly statistics of all variables were mainly used. In calculating interest rate volatility Kenen and Rodrik proposed one of the method i.e., moving-sample standard deviation method that is also used in this study.
18 pages (4500 words) Essay
Risk Measurement and Management: interest rate, liquidity and operational risk
These changes frequently affect securities unequally and can be minimized through diversification or hedging. Diversification can be done by venturing into fixed income securities with different periods while hedging is done through the swap of interest rate.
12 pages (3000 words) Essay
On the Numerical Solution of Black-Scholes Equation
Partial difference equations can be solved using either Finite difference methods or Finite element methods. Both these methods make use of a discrete mesh and the values are calculated at the mesh points by iteration using known values. This paper discusses an alternative method which is meshless and is based on Radial Basis functions(RBF’s).It discusses the results obtained after using different sets of RBF’s namely ThinPlateSpline(TPS),Multiquadric(MQ),Cubic and Gaussian 2 Black-Scholes equation A derivative is a financial instrument whose value is derived from one or more underlying commodities.
3 pages (750 words) Article
Interest Rate SWAPS
The specified underlying or rather the fundamental asset is probable to exist in the form of forex, equity, commodity or even other existing relevant asset. There have been stated to be numerous forms of derivatives contracts that are being used among which interest rate swaps is considered to be a common form (Hunt & Kennedy, 2004).
8 pages (2000 words) Literature review
Interest rate convergence / Covered or uncovered interest rate parity
dollar. It has started in the United States (U.S.) and rapidly spread to Europe, United Kingdom (U.K.), Asia and other economies around the world in the late 2008 will have a broad impact, particularly in the short term (Peters, 2010, pp.1-2). It is having strong consequences through the bank lending channel such as the banks of U.K.
13 pages (3250 words) Dissertation
The effects of interest rate liberalization to the risk of commercial banks in china
Interest rates are basically used to manage monetary conditions and mobilize and deployed the resources in an efficient and effective manner. Interest rate usually remains the supervision and administration of government. Interest rate is calculated on reduction balancing method.
20 pages (5000 words) Literature review
The Effect of interest rate Liberalization on the risk of commercial banks in China
China finally opted for interest rate liberalization in the year 2004, around thirty-six years after the reform process under Deng had started.
60 pages (15000 words) Dissertation
Discuss the arguments for and against compulsory audit firm rotation and also for and against a total ban on audit companies(by which is meant firms of accountants) carrying out non-audit services
scandals of Enron and World Call in the early 20th century which involved the audit firms as accomplices of corruption and frauds the audit firms’ role and responsibilities have come under huge question. People all over the globe have started to ponder on the pros and cons of
7 pages (1750 words) Essay
Taxation and growth
Different countries adopt different tax policies that are suitable for their economies (Auerbac & Gorodnicheko, 2010). During an economic recession, there is a
8 pages (2000 words) Essay
Business Financing and the Capital SStructure
Debt is the borrowing of money by the company using the various debt instruments and then repaying the money plus an interest. Equity is the selling of the company’s interests in a bid to raise money. Debt has several advantages over equity. First, in debt financing the
2 pages (500 words) Assignment
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email