Working Paper
Interest rate option pricing with volatility humps
Abstract: A development of a simple model in which interest rate claims are priced in the Heath-Jarrow-Morton paradigm and so incorporate full information on the term structure. The volatility structure for forward rates is humped and includes as a special case the exponentially dampened volatility structure used in the generalized Vasicek model.
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https://doi.org/10.26509/frbc-wp-199714
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Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers (Old Series)
Publication Date: 1997
Number: 9714