We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
An Empirical Investigation of the Market for Comex Gold Futures Options.
- Authors
BAILEY, WARREN
- Abstract
Option-pricing models that assume a constant interest rate may misprice futures options if the interest rate fluctuates significantly or if the price of the underlying asset is correlated with the interest rate. The futures option-pricing model of Ramaswamy and Sundaresan allows for a stochastic interest rate and correlation of the underlying asset's price with the interest rate. Using a data set of daily closing prices for Comex gold futures options, this paper tests the Ramaswamy and Sundaresan model against a constant interest rate model. Results indicate that the stochastic interest rate model is a superior predictor of market prices.
- Subjects
GOLD; FUTURES; OPTIONS (Finance); INTEREST rates; ASSETS (Accounting); ECONOMIC indicators; PRICING; MARKET prices; ECONOMIC forecasting; STOCHASTIC processes; COMMODITY futures; MARKET pricing; ECONOMICS
- Publication
Journal of Finance (Wiley-Blackwell), 1987, Vol 42, Issue 5, p1187
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1987.tb04360.x