TY - JOUR
AU - Francisco Venegas Martínez
PY - 2002/07/01
Y2 - 2023/03/29
TI - Coverage of financial flows with fixed income instruments
JF - Estudios Económicos
JA - EE
VL - 17
IS - 2
SE - Articles
DO - 10.24201/ee.v17i2.195
UR - https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/195
AB - In this paper, we develop a stochastic model to hedge the present value of cash flows against interest-rate risk with fixed-income products, in particular, with zero coupon bonds. In our approach, the dynamics of the interest rate is driven by a mean-reverting stochastic diffusion process. The model stresses the concepts of money duration and money convexity in interest-rate risk management. An application is addressed, by way of illustration, to generate hedging strategies with zero coupon bonds when the term structure of the interest rate is driven by the Vasicek’s (1977) model.
ER -