Unspanned Stochastic Volatility: Evidence from Hedging Interest Rate Derivatives
研究发现二次期限结构模型在利率衍生品对冲中存在系统性误差，表明存在与随机波动率相关的未覆盖因子，对金融学者和从业者理解衍生品定价有参考价值。
ABSTRACT Most existing dynamic term structure models assume that interest rate derivatives are redundant securities and can be perfectly hedged using solely bonds. We find that the quadratic term structure models have serious difficulties in hedging caps and cap straddles, even though they capture bond yields well. Furthermore, at‐the‐money straddle hedging errors are highly correlated with cap‐implied volatilities and can explain a large fraction of hedging errors of all caps and straddles across moneyness and maturities. Our results strongly suggest the existence of systematic unspanned factors related to stochastic volatility in interest rate derivatives markets.