111 Options on BondsThis chapter studies the arbitrage-free pricing ofvarious types of options on bonds. Two types of structures are considered:distribution independent and distributiondependent. Distribution independent methods are those thatdo not depend on a particular evolution for theterm structure of interest rates, while distributiondependent structures do. Distribution independent models generate verygeneral results, often not specific enough togenerate exact pricing and hedging descriptions. Usually, only pricing inequalities and bounds onsynthetic constructions can be obtained. Hence,the need for distribution dependent models.
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