Much of the work on real options assumes that the underlying state variable follows a geometric Brownian motion with constant volatility. This paper uses a more general assumption for the state variable process that better captures the empirical regularities found in commodity markets. We use...

A closed‐form 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 sense of...

This paper proposes an alternative characterization of the early exercise premium that is valid for any Markovian and diffusion underlying price process as well as for any parameterization of the exercise boundary. This new representation is shown to provide the best pricing alternative...

The Duffie-Kan (1996) model, which can be considered as the most general affine term structure model, was originally specified in terms of risk-adjusted stochastic processes for its state variables. Here, the Duffie and Kan (1996) model is initially fitted into a general equilibrium framework...

This paper compares the efficiency of traditional and stochastic interest rate risk measures under two distinct interest rate term structure frameworks: the Nelson-Siegel specification and an HJM consistent parametrization, as proposed by Bjork and Christensen(1999). Empirical analysis suggests...