Hedging mortgage risk with T-bond futures and options: a case study

dc.contributor.author Messerschmidt, Daniel
dc.contributor.department Economics
dc.date 2018-08-16T02:22:07.000
dc.date.accessioned 2020-07-02T06:05:20Z
dc.date.available 2020-07-02T06:05:20Z
dc.date.copyright Sun Jan 01 00:00:00 UTC 1984
dc.date.issued 1984
dc.description.abstract <p>Pronounced upward movements in interest rates can result in substantial losses for financial institutions which hold fixed interest rate assets. The purpose of this study is to empirically evaluate the effectiveness of alternative hedging strategies using Treasury bond futures and futures options in reducing the risk of holding mortgage positions;A simulation of Treasury bond futures options prices is undertaken using the Black model for pricing call options and the put-call parity equation for pricing put options. The estimated put prices are then used to estimate the risk-return distributions of put and call hedged positions. Alternative strategies which are evaluated in this study are hedging the cash position with Treasury bond futures contracts and the risk minimizing hedge ratio, hedging with futures contracts and stop orders on the contracts, hedging with futures contracts and buying call options on the contracts, and hedging with put options on the futures contracts. For each of the alternative options hedges the risk-return distributions are determined for different exercise prices of the options. The alternative strategies are then evaluated by comparing their respective risk-return distributions.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/rtd/8194/
dc.identifier.articleid 9193
dc.identifier.contextkey 6330796
dc.identifier.doi https://doi.org/10.31274/rtd-180813-6849
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath rtd/8194
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/81155
dc.language.iso en
dc.source.bitstream archive/lib.dr.iastate.edu/rtd/8194/r_8505848.pdf|||Sat Jan 15 02:07:34 UTC 2022
dc.subject.disciplines Finance
dc.subject.disciplines Finance and Financial Management
dc.subject.keywords Economics
dc.title Hedging mortgage risk with T-bond futures and options: a case study
dc.type article
dc.type.genre dissertation
dspace.entity.type Publication
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
thesis.degree.level dissertation
thesis.degree.name Doctor of Philosophy
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