IDEAS home Printed from
   My bibliography  Save this book chapter

Single-Period Binomial Heath–Jarrow–Morton Model

In: An Introduction to Derivative Securities, Financial Markets, and Risk Management




The following sections are included:IntroductionThe Basic Interest Rate DerivativesUses of Caps, Floors, and CollarsA Brief History of Interest Rate Derivatives ModelsThe AssumptionsThe Single-Period ModelArbitrage-Free EvolutionsZero-Coupon Bond Prices and MartingalesUnderstanding the Equal Pseudo-probability ConditionActual versus Pseudo-probabilitiesCaplet PricingThe Hedge Ratio (the Holy Grail)Risk-Neutral ValuationValuing a FloorletValuing Various Interest Rate DerivativesMultiple FactorsSummaryAppendixThe Equal Pseudo-probability ConditionProof of SufficiencyProof of Caplet and Floorlet ParityCasesQuestions and Problems

Suggested Citation

  • Robert A. Jarrow & Arkadev Chatterjea, 2019. "Single-Period Binomial Heath–Jarrow–Morton Model," World Scientific Book Chapters,in: An Introduction to Derivative Securities, Financial Markets, and Risk Management, chapter 23, pages 558-591 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9781944659561_0023

    Download full text from publisher

    File URL:
    Download Restriction: Ebook Access is available upon purchase.

    File URL:
    Download Restriction: Ebook Access is available upon purchase.

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

    More about this item


    Derivatives; Financial Markets; Risk Management; Arbitrage; Financial Engineering; Forwards; Futures; Call Options; Put Options; European Options; American Options; Swaps; Currency Swaps; Interest Rate Swaps; Commodity Swaps; Equity Swaps; Credit Default Swaps; Commodity Derivatives; Equity Derivatives; Index Derivatives; Interest Rate Derivatives; Commodities; Margins and Daily Settlements; Binomial Model; Black-Scholes Model; Black-Scholes-Merton Model; Delta Hedging; Gamma Hedging; Heath-Jarrow-Morton Model; Libor Model; Forward Rate Agreements; Interest Rate Futures; Interest Rate Options; Market Manipulation; Regulation; Derivatives Exchanges;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics


    Access and download statistics


    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:wschap:9781944659561_0023. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.