PLA for realized gamma/interest rate part of a hybrid derivative

florian · July 8th, 2009, 6:11 pm

hi,there is a well known nice formula for the gamma effect in explaining options p&l: gamma-P&L = 0.5 * S^2 * Gamma * (realised-vol² - implied-vol²)if you have a hybrid derivative/model with a short-rate model for interest rates (Hull-White in this case),which of course depends on "virtual" quantities (short rates), is there any meaningfulway to extend this equation or smthg similar to observable parameters?(eg realised swap rate vols etc.)Thanks, F.

florian · July 23rd, 2009, 7:12 pm

no idea?question unclear?too easy?

Miner · July 28th, 2009, 3:04 am

I guess the equation holds true not only for vanilla option. u can use Taylor's furmula to get what u want