Pricing and Hedging Bond Power Exchange Options in a Stochastic String Term-Structure Model

Pricing and Hedging Bond Power Exchange Options in a Stochastic String Term-Structure Model

We study power exchange options written on zero-coupon bonds under a stochastic string term-structure framework. Closed-form expressions for pricing and hedging bond power exchange options are obtained and, as particular cases, the corresponding expressions for call power options and constant underl...

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Bibliographic Details
Main Authors: Lloyd P. Blenman, Alberto Bueno-Guerrero, Steven P. Clark
Format: Article
Language:English
Published: MDPI AG 2022-09-01
Series:Risks
Subjects:
stochastic string process
term-structure model
bond option pricing
Malliavin calculus
Online Access:https://www.mdpi.com/2227-9091/10/10/188

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