In this paper, we present an index option pricing equation that is theoretically superior to prior models. Specially, we develop an analytic index option pricing equation assuming each security underlying the index follows geometric Brownian motion. We compare our model to the standard index...

In this paper, we develop a model for pricing default-risky interest rate swaps in a partial equilibrium framework by treating them as an exchange of two hypothetical securities. We provide an empirical look at the various factors that make up the bid-ask rates quoted by the swap dealers. We...

We examine the incidence of corporations lowering the exercise prices of their executive stock options. These options can be viewed as a combination of a down-and-out call option and a down-and-in call option with the exercise price equal to the barrier. Using barrier option pricing theory, we...

We investigate the information contained in the London Interbank Offered Rate (LIBOR) and the U.S. Constant Maturity Treasury (CMT) term structure of interest rates and report three novel findings. First, we document that the information contained in term structures are significantly different...

The difference between a basis option pricing model on futures or forward contracts, assuming both underlying futures contracts follow geometric Brownian motion, and a basis option pricing model on futures contracts, assuming both underlying securities follow arithmetic Brownian motion are non...

Using Eurodollar futures prices to assess information in the term structure of interest rates we find that Eurodollar futures rates have power to forecast period profits in the Eurodollar futures market (based on LIBOR). The more interesting discovery is that short-term implied futures rates...