Sensitivity Analysis of Variance Gamma Parameters for Interest Rate Derivatives

Abstract

Interest rate derivatives being financial instruments whose values are affected by movements in interest rates experience jumps due to many unforeseen circumstances, and thus, require adequate modelling and sensitivity analysis that consider such scenarios in order to minimize risks. This paper derives expressions for the greeks from parameters of a variance gamma process required when computing the sensitivities of the parameters of an interest rate derivative called zero-coupon bond driven by the variance gamma process.