Options on bonds: implied volatilities from affine short-rate dynamics

Matthew Lorig () and Natchanon Suaysom ()
Additional contact information
Matthew Lorig: University of Washington
Natchanon Suaysom: University of Washington

Annals of Finance, 2022, vol. 18, issue 2, No 2, 183-216

Abstract: Abstract We derive an explicit asymptotic approximation for the implied volatilities of Call options written on bonds assuming the short-rate is described by an affine short-rate model. For specific affine short-rate models, we perform numerical experiments in order to gauge the accuracy of our approximation.

Keywords: Affine short-rate; Implied volatility; Options on bonds (search for similar items in EconPapers)
JEL-codes: C60 C63 C65 G10 G19 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10436-022-00407-w Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:18:y:2022:i:2:d:10.1007_s10436-022-00407-w

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10436/PS2

DOI: 10.1007/s10436-022-00407-w

Access Statistics for this article

Annals of Finance is currently edited by Anne Villamil

More articles in Annals of Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().