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Pricing Interest-Rate-Derivative Securities

John Hull; Alan White

University of Toronto

Review of Financial Studies 1990

This article shows that the one-state-variable interest-rate models of Vasicek (1977) and Cox, Ingersoll, and Ross (1985b) can be extended so that they are consistent with both the current term structure of interest rates and either the current volatilities of all spot interest rates or the current volatilities of all forward interest rates. The extended Vasicek model is shown to be very tractable analytically. The article compares option prices obtained using the extended Vasicek model with those obtained using a number of other models.

DOI
10.1093/rfs/3.4.573
Volume
3 (4)
Pages
573-592
Language
en
Export
BibTeX
Sources
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