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813
Jackknifing bond option prices
 REVIEW OF FINANCIAL STUDIES
, 2005
"... Prices of interest rate derivative securities depend crucially on the mean reversion parameters of the underlying diffusions. These parameters are subject to estimation bias when standard methods are used. The estimation bias can be substantial even in very large samples and much more serious than t ..."
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Cited by 40 (19 self)
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the discretization bias, and it translates into a bias in pricing bond options and other derivative securities that is important in practical work. This article proposes a very general and computationally inexpensive method of bias reduction that is based on Quenouille’s (1956; Biometrika, 43, 353–360) jackknife. We
A closedform solution for options with stochastic volatility with applications to bond and currency options
 Review of Financial Studies
, 1993
"... I use a new technique to derive a closedform solution for the price of a European call option on an asset with stochastic volatility. The model allows arbitrary correlation between volatility and spotasset returns. I introduce stochastic interest rates and show how to apply the model to bond option ..."
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Cited by 1512 (6 self)
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I use a new technique to derive a closedform solution for the price of a European call option on an asset with stochastic volatility. The model allows arbitrary correlation between volatility and spotasset returns. I introduce stochastic interest rates and show how to apply the model to bond
Modeling Term Structures of Defaultable Bonds
, 1999
"... This article presents convenient reducedform models of the valuation of contingent claims subject to default risk, focusing on applications to the term structure of interest rates for corporate or sovereign bonds. Examples include the valuation of a creditspread option ..."
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Cited by 672 (34 self)
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This article presents convenient reducedform models of the valuation of contingent claims subject to default risk, focusing on applications to the term structure of interest rates for corporate or sovereign bonds. Examples include the valuation of a creditspread option
1 Simulating American Bond Options in an HJM Framework
"... This paper develops a method called Markov Chain Approximation (MCA) to approximate the value of American bond options in a general multi−factor Heath−Jarrow− Morton (HJM) framework. Our approach is based on the methodology of Barraquand and Martineau (1995), which was developed for processes which ..."
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This paper develops a method called Markov Chain Approximation (MCA) to approximate the value of American bond options in a general multi−factor Heath−Jarrow− Morton (HJM) framework. Our approach is based on the methodology of Barraquand and Martineau (1995), which was developed for processes which
Simulating American Bond Options in an HJM Framework
, 1998
"... This paper develops a method called Markov Chain Approximation (MCA) to approximate the value of American bond options in a general multifactor HeathJarrowMorton (HJM) framework. Our approach is based on the methodology of Barraquand and Martineau (1995), which was developed for processes which ar ..."
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Cited by 6 (0 self)
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This paper develops a method called Markov Chain Approximation (MCA) to approximate the value of American bond options in a general multifactor HeathJarrowMorton (HJM) framework. Our approach is based on the methodology of Barraquand and Martineau (1995), which was developed for processes which
THE VALUATION OF BONDS AND BOND OPTIONS: SOME EMPIRICAL TESTS
"... We thank Andrea Cividini for Marquardt’s algorithm and Gianluca Salsecci for his helpful suggestions. This paper has been prepared for the “International Workshop on LargeScale Economic and Financial Applications: New Tools and Methodologies ” held in Urbino (May 10th, 1991). SUMMARY This paper pr ..."
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presents a general method for valuing fixed rate bonds and options written on them. In the first part, of a theoretical nature, we present valuation formulae, derived within the framework of the Cox, Ingersoll and Ross (CIR) model, both for bonds and for European options written on bonds (with and without
Term Structure and Bond Option Pricing under GARCH
, 1996
"... This model is based on a representative agent approach in an economy in which the nominal aggregate consumption growth rate follows the GARCH process. We first derive an equilibrium nominal interest rate process. This equilibrium nominal interest rate process is shown to be meanreverting and hetero ..."
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Cited by 3 (2 self)
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This model is based on a representative agent approach in an economy in which the nominal aggregate consumption growth rate follows the GARCH process. We first derive an equilibrium nominal interest rate process. This equilibrium nominal interest rate process is shown to be meanreverting and heteroskedastic with a noncentral X 2 innovation. An equilibrium pricing measure is then constructed, and the equilibrium interest rate dynamics under this measure is characterized to serve as a pricing mechanism for the term structure of interest rates and interest rate derivatives. This new pricing approach is found to substantially differ from the term
Pricing swaptions and coupon bond options in affine term structure models
 Mathematical Finance
, 2006
"... We propose an approach to find an approximate price of a swaption in affine term structure models. Our approach is based on the derivation of approximate swap rate dynamics in which the volatility of the forward swap rate is itself an affine function of the factors. Hence, we remain in the affine fr ..."
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Cited by 6 (0 self)
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framework and wellknown results on transforms and transform inversion can be used to obtain swaption prices in similar fashion to zero bond options (i.e., caplets). The method can easily be generalized to price options on coupon bonds. Computational times compare favorably with other approximation methods
Stochastic duration and fast coupon bond option pricing in multifactor models
 Review of Derivatives Research
, 1999
"... Abstract. Generalizing Cox, Ingersoll, and Ross (1979), this paper defines the stochastic duration of a bond in a general multifactor diffusion model as the time to maturity of the zerocoupon bond with the same relative volatility as the bond. Important general properties of the stochastic duratio ..."
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Cited by 16 (1 self)
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duration measure are derived analytically, and the stochastic duration is studied in detail in various wellknown models. It is also demonstrated by analytical arguments and numerical examples that the price of a European option on a coupon bond (and, hence, of a European swaption) can be approximated very
Results 1  10
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813