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|Title:||Pricing interest rate contingent claims|
|Doctoral Committee Chair(s):||D'Arcy, Stephen P.|
|Department / Program:||Finance|
|Degree Granting Institution:||University of Illinois at Urbana-Champaign|
|Abstract:||This thesis extends the previous work on interest rate contingent claims in several ways. First, futures pricing models and futures options pricing models are derived. These models are under the settings of both single state variable and two state variables. The derivations make use of regular techniques in solving partial differential equations and the risk-neutral pricing methodology.
Second, the forward price valuation process helps to find the futures price under discrete marking to market. The derivation makes use of a simple concept: finding a futures price under discrete marking to market is finding a sequence of forward prices. This simple technique can also help us to decide whether or not closed form solutions exist.
Last, numerical results on options confirm that interest rate futures options can not be priced by either Black's model for commodity futures options or Jamshidian's model for bond options. Numerical results on forward prices and futures prices, on the other hand, tells an opposite story. It is found that the difference between the two prices is always less than 2%. This finding reduces the significance of the discrete marking to market model for futures contracts. A simple test on the one factor futures pricing model shows that the model is not supported by the data.
|Rights Information:||Copyright 1990 Chen, Ren-Raw|
|Date Available in IDEALS:||2011-05-07|
|Identifier in Online Catalog:||AAI9114196|
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