Publication | Closed Access
An Exact Bond Option Formula
640
Citations
6
References
1989
Year
Option PricingTerm Structure ModelFinancial EconomicsAsset PricingChemical BondEuropean OptionsDerivative PricingHydrogen BondBusinessBond MarketComputational ChemistryQuantum ChemistryPure Discount BondsDiscount Bond PortfoliosFinanceInterest Rate ModelingFinancial Mathematics
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.
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