We review the continuous--time literature on the so-- called direct approach to bond option pricing. Going back to Ball and Torous (1983), this approach models bond price processes directly (i.e. without reference to interest rates or state variable processes) and applies methods that Black and...

Ein Bewertungsmaß das auf den sog. Zustandspreisen basiert, erlaubt in Binomialmodellen der Zinsstruktur die Konstruktion eines einheitlichen Modellrahmens und eines effizienten Algorithmus zur Implementation. Dieser Rahmen ist geeignet, die sich aus der Bedingung der Arbitragefreiheit...

The paper developes a general arbitrage free model for the term structure of interest rates. The principal model is formulated in a discrete time structure. It differs substantially from the Ho--Lee-- Model (1986) and does not generate negative spot and forward rates. The results for the...

The extension of the Black-Scholes option pricing theory to the valuation of barrier options is reconsidered. Working in the binomial framework of CRR we show how various types of barrier options can be priced either by backward induction or by closed binomial formulas. We also consider...