Options on U.S. Treasury Coupon Issues

Thomas J Finucane

The Financial Review, 1988, vol. 23, issue 4, 403-26

Abstract: Pricing models for options on default-free coupon bonds are develop ed and tested under the assumption that the bond prices, rather than interest rates, are the underlying stochastic factors. Under the assumption that coupon bond prices, excluding accrued interest, follow a generalized Brownian bridge process, preference-free, contin uous-time pricing models are developed for European put and call options, and a discrete-time model is developed for American puts and calls. The empirical validity of the models is assessed using a six-month sample of daily closing prices. Copyright 1988 by MIT Press.

Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:23:y:1988:i:4:p:403-26

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