On Arbitrage-Free Pricing of Interest Rate Contingent Claims

Peter Ritchken and Kiekie Boenawan

Journal of Finance, 1990, vol. 45, issue 1, 259-64

Abstract: Unlike most interest rate claim models, the Ho-Lee (1986) 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. Copyright 1990 by American Finance Association.

Date: 1990
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