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An Exact Bond Option Formula

Farshid Jamshidian
Journal of Finance 1989 44(1), 205-209
ABSTRACT This paper derives a closed‐form solution for European options on pure discount bonds, assuming a mean‐reverting Gaussian interest rate model as in Vasicek [8]. The formula is extended to European options on discount bond portfolios.

An Exact Bond Option Formula

Farshid Jamshidian
Journal of Finance 1989 44(1), 205
This paper derives a closed-form solution for European options on pure discount bonds, assuming a mean-reverting Gaussian interest rate model as in Vasicek [8]. The formula is extended to European options on discount bond portfolios.