Lecture 21 - Dynamic Hedging and Average Life
Download yalemecon251f09_geanakoplos_lec21_01.mp4 (Video - generic video source 848.5 MB)
Download yalemecon251f09_geanakoplos_lec21_01.flv (Video 368.3 MB)
Download yalemecon251f09_geanakoplos_lec21_01.wmv (Video 330.5 MB)
Report a problem or upload filesIf you have found a problem with this lecture or would like to send us extra material, articles, exercises, etc., please use our ticket system to describe your request and upload the data.
Enter your e-mail into the 'Cc' field, and we will keep you updated with your request's status.
This lecture reviews the intuition from the previous class, where the idea of dynamic hedging was introduced. We learn why the crucial idea of dynamic hedging is marking to market: even when there are millions of possible scenarios that could come to pass over time, by hedging a little bit each step of the way, the number of possibilities becomes much more manageable. We conclude the discussion of hedging by introducing a measure for the average life of a bond, and show how traders use this to figure out the appropriate hedge against interest rate movements.
Link this pageWould you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !