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| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Analytical solutions for the pricing of american bond and yield options |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Mathematical Finance |
| Publisher | Wiley-Blackwell |
| Geographical Reach | international |
| ISSN | 0960-1627 |
| Volume | 3 |
| Number | 3 |
| Page Range | 277 - 294 |
| Date | 1993 |
| Abstract Text | In this paper we use the Cox, Ingersoll, and Ross (1985b) single-factor, term structure model and extend it to the pricing of American default-free bond puts. We provide a quasi-analytical formula for these option prices based on recently established mathematical results for Bessel bridges, coupled with the optimal stopping time method. We extend our results to another interest rate contingent claim and provide a quasi-analytical solution for American yield option prices which illustrates the flexibility of our framework. |
| Digital Object Identifier | 10.1111/j.1467-9965.1993.tb00045.x |
| Other Identification Number | merlin-id:4687 |
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| Keywords | American bond option, , , Bessel processes, , , early exercise premium, , , free boundary approach, , , optimal stopping, , , term structure of interest rates, , , yield option |