Pricing interest rate futures options with the futures-style margining

Article Abstract:

The extensions of Black's model for pricing futures options with futures-style margining is shown to hold in a general equilibrium model with stochastic interest rate. This result suggests that futures options with futures-style margining should be applied late since prices exceed the intrinsic value prior to expiration. The process of modifying several existing models for interest rate futures options to allow futures-style margining is described.

Margins (Futures trading), Commodity options

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Arbitrage free pricing of interest rate futures and forward contracts

Article Abstract:

A 'closed form continuous time pricing formula for discretely marked to market futures contracts' is derived and prices a futures contract whose final settlement is a nonlinear function of the underlying asset price. The resulting formulas are used to explain the dependence of the price differential between the futures and forwards on the contract specifications and on the volatility of interest rates.

Prices and rates, Options (Finance), Financial futures, Futures

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Pascal spreading of shert-term interest rate contracts

Article Abstract:

A study of short term interest rate futures contracts revealed that the spread of value-oriented hedge trading resembled Pascal's spreading triangle. The futures market of short sterling deposits was analyzed for the study. Effects of changes caused by Y2K were anticipated.

United Kingdom, Statistical Data Included, Models, Management, Usage, Hedging (Finance), Year 2000 transition (Computers), Pascal's triangle

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