BOND MARKET MODEL

We describe the Bond Market Model, a multi-factor interest rate term structure model, where it is possible to price with Black-like formulas the three classes of over-the-counter plain vanilla options. We derive the prices of caps/floors, bond options and swaptions. A comparison with Libor Market Model and Swap Market Model is discussed in detail, underlining advantages and limits of the different approaches.

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Year of publication:	2006
Authors:	BAVIERA, ROBERTO
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 09.2006, 04, p. 577-596
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	HJM framework \| term structure model \| caps/floors \| bond options \| swaptions

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004977452