Pricing CIR Yield Options by Conditional Moment Matching

Adrian Prayoga () and Nicolas Privault
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Adrian Prayoga: Nanyang Technological University

Asia-Pacific Financial Markets, 2017, vol. 24, issue 1, No 2, 19-38

Abstract: Abstract We propose an approximation scheme for the pricing of yield options in the CIR model using conditional moment matching based on the gamma and lognormal distributions. This method is fast and simple to implement, and it shows a high degree of accuracy without being subject to the numerical instabilities that can be encountered with more sophisticated approaches.

Keywords: CIR model; Asian options; Asian caps; Conditional moment matching; Stratified approximation; 91B28; 60J60; 33C10; 97M30 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10690-017-9222-5

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