IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v06y2003i01ns0219024903001785.html
   My bibliography  Save this article

Explicit Bond Option Formula In Heath–Jarrow–Morton One Factor Model

Author

Listed:
  • MARC HENRARD

    (Banking Department, Bank for International Settlements, Aeschenplatz 1, CH-4002 Basel, Switzerland)

Abstract

We hereby present an explicit formula for European options on coupon bearing bonds in the Heath–Jarrow–Morton one factor model with non-stochastic volatility. The formula extends the Jamshidian formula for zero-coupon bonds for special form of volatility. Moreover we present a formula for zero-coupon bonds without condition on the volatility. We provide also an explicit way to compute the hedging ratio (Δ) in order to hedge the options individually.

Suggested Citation

  • Marc Henrard, 2003. "Explicit Bond Option Formula In Heath–Jarrow–Morton One Factor Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 57-72.
    • Handle: RePEc:wsi:ijtafx:v:06:y:2003:i:01:n:s0219024903001785
    DOI: 10.1142/S0219024903001785
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024903001785
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024903001785?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcin Dec, 2019. "Markovian and multi-curve friendly parametrisation of a HJM model used in valuation adjustment of interest rate derivatives," Bank i Kredyt, Narodowy Bank Polski, vol. 50(2), pages 107-148.
    2. Marc Henrard, 2005. "Bermudan swaptions in Hull-White one-factor model: analytical and numerical approaches," Finance 0505023, University Library of Munich, Germany.
    3. Bünyamin Erkan & Jean-Luc Prigent, 2020. "About Long-Term Cross-Currency Bermuda Swaption Pricing," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 239-262, June.
    4. Ingo Beyna & Carl Chiarella & Boda Kang, 2012. "Pricing Interest Rate Derivatives in a Multifactor HJM Model with Time," Research Paper Series 317, Quantitative Finance Research Centre, University of Technology, Sydney.
    5. Henrard, Marc, 2007. "CMS swaps in separable one-factor Gaussian LLM and HJM model," MPRA Paper 3228, University Library of Munich, Germany.
    6. Marc Henrard, 2004. "Overnight Indexed Swaps and Floored Compounded Instrument in HJM One-Factor Model," Finance 0402008, University Library of Munich, Germany.
    7. Henrard, Marc, 2006. "Bonds futures: Delta? No gamma!," MPRA Paper 2249, University Library of Munich, Germany, revised 01 May 2006.
    8. Marc Henrard, 2006. "A Semi-Explicit Approach to Canary Swaptions in HJM One-Factor Model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(1), pages 1-18.
    9. Marc Henrard, 2005. "Inflation bond option pricing in Jarrow-Yildirim model," Finance 0510027, University Library of Munich, Germany.
    10. Henrard, Marc, 2006. "TIPS Options in the Jarrow-Yildirim model," MPRA Paper 1423, University Library of Munich, Germany.
    11. Ingo Beyna, 2013. "Interest Rate Derivatives," Lecture Notes in Economics and Mathematical Systems, Springer, edition 127, number 978-3-642-34925-6, December.
    12. Henrard, Marc, 2006. "Bonds futures and their options: more than the cheapest-to-deliver; quality option and marginning," MPRA Paper 2001, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:06:y:2003:i:01:n:s0219024903001785. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.