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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
436 Derivatives and Risk Management
erefore,
Value of the cap = 0.003166 + 0.008522 = 1.1688%
If the notional principal is INR 100,000,000, the value of the cap = INR 1,168,900
It is important to identify whether the option is based on the price of the underlying security or on
the underlying interest rate. Typically, options on xed-income securities are written on the price of the
underlying bond, while interest rate caps and oors are options that are based on the interest rate. With
options on the price of the bond, the option price and the value of the underlying bond are directly re-
lated. at is, if the interest rate decreases, the
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Publisher Resources

ISBN: 9781299447547Publisher Website