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On Arbitrage-Free Pricing of Interest Rate Contingent Claims

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  • Ritchken, Peter
  • Boenawan, Kiekie

Abstract

Unlike most interest rate claim models, the Ho-Lee (1986) model utilizes full information on the current term structure. Unfortunately, the model has a major deficiency in that negative interest rates can occur. This article modifies the model such that interest rates are well behaved. Copyright 1990 by American Finance Association.

Suggested Citation

  • Ritchken, Peter & Boenawan, Kiekie, 1990. " On Arbitrage-Free Pricing of Interest Rate Contingent Claims," Journal of Finance, American Finance Association, vol. 45(1), pages 259-264, March.
  • Handle: RePEc:bla:jfinan:v:45:y:1990:i:1:p:259-64
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    Cited by:

    1. Sercu, P., 1991. "Bond options and bond portfolio insurance," Insurance: Mathematics and Economics, Elsevier, vol. 10(3), pages 203-230, December.
    2. Jiang, George J., 1997. "A generalized one-factor term structure model and pricing of interest rate derivative securities," Research Report 97A34, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. repec:dgr:rugsom:97a34 is not listed on IDEAS

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