Another look at the ho−lee bond option pricing model

Young Shin Kim; Stoyan V. Stoyanov; Svetlozar T. Rachev; Frank J. Fabozzi

doi:10.3905/jod.2018.25.4.048

Another look at the ho−lee bond option pricing model

Young Shin Kim, Stoyan V. Stoyanov, Svetlozar T. Rachev, Frank J. Fabozzi

Mathematics and Statistics

Research output: Contribution to journal › Article › peer-review

Abstract

In this article, we extend the classical Ho–Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model. This is achieved with the introduction of a more flexible no-arbitrage condition in contrast to the one assumed in the Ho–Lee model.

Original language	English
Pages (from-to)	48-53
Number of pages	6
Journal	Journal of Derivatives
Volume	25
Issue number	4
DOIs	https://doi.org/10.3905/jod.2018.25.4.048
State	Published - Jun 1 2018

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10.3905/jod.2018.25.4.048

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