This paper uses three methods to estimate quality option values for Chicago Board of Trade Treasury bond futures contracts. It presents evidence regarding payoffs from exercising this option at delivery, estimates from a T-bond futures pricing model that incorporates this option, and estimates obtained from an exchange option pricing formula. The results indicate that this option is worth considerably less than reported by A. Kane and A. Marcus (1986). For example, payoffs obtained by switching from the bond cheapest to deliver three months prior to delivery to the one cheapest at time of delivery average less than 0.30 percentage points of par. Copyright 1990 by American Finance Association.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 45 (1990) Issue (Month): 5 (December) Pages: 1565-86 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)