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