1. An Exact Bond Option Formula.
- Author
-
JAMSHIDIAN, FARSHID
- Subjects
OPTIONS (Finance) ,BONDS (Finance) ,INTEREST rates ,INVESTMENTS ,GAUSSIAN processes ,MATHEMATICAL models ,LOGNORMAL distribution ,MATHEMATICAL decomposition ,DEVIATION (Statistics) - Abstract
This paper derives a closed-form solution for European options on pure discount bonds, assuming a mean-reverting Gaussian interest rate model as in Vasicek [8]. The formula is extended to European options on discount bond portfolios. [ABSTRACT FROM AUTHOR]
- Published
- 1989
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