Two Closed-Form Formulas for the Futures Price in the Presence of a Quality Option

Avi Bick

Review of Finance, 1997, vol. 1, issue 1, 81-104

Abstract: The paper derives closed-form formulas for the futures price in the presence of a multi-asset quality option. This is done for two cases: In the first one the underlying assets are zero coupon bonds with different maturities in the single-factor Vasicek model. In the second one these are commodities in a multi-factor setting, again with Vasicek interest rate uncertainty.

Date: 1997
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