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Longer term options work better in dynamic hedging because they have lower gammas. Why long term options have lower gammas?
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Swap can be used a good hedge of interest rate risk but swaption can not. Why not swaption?
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The equivalent annual annuity approach assumes continous replacements can and will be made each time the asset’s life end. At first, I thought this is the statement for “Least common mutiple of lives approach”. I guess they share the same description?
Thank you!