The article makes two contributions to the literature. The first contribution is to derive a closed-form solution of Taiwanese capped options. We also provide the properties of Taiwanese capped options and the phenomenon of delta jump at monitoring dates. When the interest rate changes...

This study empirically tests the performance of the Future Option model with Basis Risk (FOBR) proposed by Wang et al. (2005). The Black (1976) model is used as the competing model in this empirical test. The basis risk is the only difference between the two competing models and is therefore...