Multifactor and analytical valuation of treasury bond futures with an embedded quality option
Journal of Futures Markets
Estados Unidos da América
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 M. Curran (1994) and L. Rogers and Z. Shi (1995), or via a rank 1 approximation, following A. Brace and M. Musiela (1994). Monte Carlo simulations show that both approximations are extremely accurate and easy to calculate.
Classificação Fields of Science and Technology
- Economia e Gestão - Ciências Sociais