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- Title
Fixed-income average options: a pricing approach based on Gaussian mean-reverting cyclical models.
- Authors
León-Pérez, Belén; Moreno, Manuel
- Abstract
This paper values fixed-income (discrete- and continuous-time) European Asian and Australian options. We assume that the term structure of interest rates is modelled by the specification proposed in Moreno et al. (Econ Model 72:140–150, 2018, https://doi.org/10.1016/j.econmod.2018.01.015). We obtain closed-form expressions for the premiums of geometric average options and, for arithmetic average options, premiums are computed by numerical methods. We also perform a sensitivity analysis with respect to different parameters for both (geometric and arithmetic) options.
- Subjects
YIELD curve (Finance); PRICES; SENSITIVITY analysis; FIXED incomes; FIXED-income securities
- Publication
Annals of Operations Research, 2024, Vol 337, Issue 1, p167
- ISSN
0254-5330
- Publication type
Article
- DOI
10.1007/s10479-024-05904-x