Path dependent options on yields in the affine term structure model

Olivier Scaillet and Boris Leblanc
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Boris Leblanc: Banque Nationale de Paris, Université Paris VII and CREST Laboratoire de Finance Assurance, Bâtiment Malakoff 2 - Timbre J320, 15 Boulevard Gabriel Péri, F-92245 Malakoff Cedex, France

Finance and Stochastics, 1998, vol. 2, issue 4, 349-367

Abstract: We give analytical pricing formulae for path dependent options on yields in the framework of the affine term structure model. More precisely, European call options such as the arithmetic average call, the call on maximum and the lookback call are examined. For the two last options approximate formulae using the law of hitting times of an Ornstein-Uhlenbeck process are proposed. Numerical implementation is also briefly discussed and results are given in the case of the arithmetic average option.

Keywords: Term structure; path dependent options; affine model; hitting time; Laplace transform (search for similar items in EconPapers)
JEL-codes: E43 G13 (search for similar items in EconPapers)
Date: 1998-07-27
Note: received: September 1996; final version received: October 1997
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Citations: View citations in EconPapers (15)

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