Linear bonds valuation with interest rate models : does it work?
This paper compares the implications of different interest rate models for valuing the so-called OLOs (Belgian coupons bonds). The prices of these bonds implied by some well-known one-factor models are compared to the actual prices observed on the market. Our finding suggest that these interest rate models are unsatisfactory, especially in valuing longer term bonds.
|Date of creation:||01 Jun 1998|
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