BOND MARKET MODEL

Roberto Baviera ()
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Roberto Baviera: Abaxbank, corso Monforte, 34, I-20122 Milan, Italy

International Journal of Theoretical and Applied Finance (IJTAF), 2006, vol. 09, issue 04, 577-596

Abstract: We describe the Bond Market Model, a multi-factor interest rate term structure model, where it is possible to price with Black-like formulas the three classes of over-the-counter plain vanilla options. We derive the prices of caps/floors, bond options and swaptions. A comparison with Libor Market Model and Swap Market Model is discussed in detail, underlining advantages and limits of the different approaches.

Keywords: HJM framework; term structure model; caps/floors; bond options; swaptions (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1142/S0219024906003640

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