A pricing model for yield contracts
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- Discussion papers (FOR) 
An economic model is proposed for a combined price futures and yield futures market. The innovation of the paper is a technique of transforming from quantity and price to a model of two genuine pricing processes. This is required in order to apply modern financial theory. It is demonstrated that the resulting model can be estimated solely from data for a yield futures market and a price futures market. We develop a set of pricing formulas, some of which are partially tested, using price data for area yield options from the Chicago Board of Trade. Compared to a simple application of the standard Black and Scholes model, our approach seemes promising.
PublisherNorwegian School of Economics and Business Administration. Department of Finance and Management Science