On arbitrage-free pricing of interest rate contingent claims

Article Abstract:

Unlike most interest rate claim models, the Ho-Lee model utilizes full information on the current term structure. Unfortunately, the model has a major deficiency in that negative interest rates can occur. This article modifies the model such that interest rates are well behaved. (Reprinted by permission of the publisher.)

Prices and rates, Arbitrage, Interest rate futures

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An exact bond option formula

Article Abstract:

This paper derives a closed-form solution for European options on pure discount bonds, assuming a mean-reverting Gaussian interest rate model in Vasicek. The formula is extended to European options on discount bond portfolios. (Reprinted by permission of the publisher.)

Portfolio management

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