Implied option prices from the continuous time CKLS interest rate model: an application to the UK

K. Ben Nowman and Ghulam Sorwar

Applied Financial Economics, 2003, vol. 13, issue 3, 191-197

Abstract: In this paper a numerical procedure recently applied in finance is used to compute implied bond and contingent claim prices starting from the CKLS interest rate model. The CKLS model is estimated using a range of maturities from the UK interbank market including the one week and one, two, three, six and twelve month rates. It is found that the implied default free bond prices and contingent claim prices vary across models and maturities for the UK.

Date: 2003
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DOI: 10.1080/09603100110112041

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