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Eurodollar futures and options: convexity adjustment in HJM one- factor model

Author

Listed:
  • Henrard Marc

    (BIS)

Abstract

In this note we give pricing formulas for different instruments linked to rate futures (euro-dollar futures). We provide the future price including the convexity adjustment and the exact dates. Based on that result we price options on futures, including the mid-curve options.

Suggested Citation

  • Henrard Marc, 2005. "Eurodollar futures and options: convexity adjustment in HJM one- factor model," Finance 0503005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0503005
    Note: Type of Document - pdf; pages: 6. Draft, all comments welcome.
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0503/0503005.pdf
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    References listed on IDEAS

    as
    1. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Vladimir Pozdnyakov & J. Michael Steele, 2009. "Convexity Bias in Eurodollar Futures Prices: A Dimension-Free HJM Criterion," Methodology and Computing in Applied Probability, Springer, vol. 11(4), pages 551-560, December.
    2. Henrard, Marc, 2007. "The irony in the derivatives discounting," MPRA Paper 3115, University Library of Munich, Germany.
    3. Dan Pirjol, 2016. "Eurodollar futures pricing in log-normal interest rate models in discrete time," Applied Mathematical Finance, Taylor & Francis Journals, vol. 23(6), pages 445-464, November.
    4. Leccadito, Arturo & Tunaru, Radu S. & Urga, Giovanni, 2015. "Trading strategies with implied forward credit default swap spreads," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 361-375.

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    More about this item

    Keywords

    Interest rate futures; options on futures; HJM; one factor model.;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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