ptions on financial futures are relatively new financial instruments, although 0 options on commodities have been in existence since the Nineteenth Century. 'See Johnson (1982a) for a chronology of the historical developments in commodity option trading. Trading in options on nonfarm futures contrac
Pricing the Quality Option In Treasury Bond Futures
β Scribed by Peter Ritchken; L. Sankarasubramanian
- Book ID
- 111042941
- Publisher
- John Wiley and Sons
- Year
- 1992
- Tongue
- English
- Weight
- 740 KB
- Volume
- 2
- Category
- Article
- ISSN
- 0960-1627
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
## Abstract A closedβform pricing solution is proposed for the quality option embedded in Treasury bond futures contracts, under a multifactor and D. Heath, R. Jarrow, and A. Morton (1992) Gaussian framework. Such an analytical solution can be obtained through a conditioning approximation, in the s
wning a security with a guaranteed future sale price and date is (almost) 0 equivalent to a short-term investment extending to the sale date. Yet, in the Treasury bond futures market the prices seem too low to provide a fair rate of return to those who short T-bond futures. That is, the short term i
ike many other futures contracts, the Treasury Bond (T-Bond) futures contract L allows the holder of a short position to satisfy the contract by delivering one of the variety of T-Bonds on one of a number of delivery dates. Accordingly, the traditional approach to pricing such contracts has concentr