Implied derivative security prices based two-factor interest model: a UK application

Ghulam Sorwar

Applied Financial Economics, 2005, vol. 15, issue 10, 739-744

Abstract: In this paper the extended Box Method recently introduced to finance is used to value bond and option prices based on the two-factor CKLS interest rate model. The two-factor CKLS model is estimated using the one-year Eurodollar rate for the UK as the long rate and either the one-week, or one-month Euro dollar rate for the UK as the short rate. Overall, it is found that both and option prices are sensitive to the model used.

Date: 2005
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DOI: 10.1080/0960310042000339730

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