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Publication year
An Empirical Investigation of the Market for Comex Gold Futures Options.
Resource type
Author/contributor
- Bailey, Warren Bernard (Author)
Title
An Empirical Investigation of the Market for Comex Gold Futures Options.
Abstract
Asset-pricing models which assume a constant interest rate may misprice contingent claims if the interest rate fluctuates significantly or if the price of the underlying asset is cor-related with the interest rate. A model per-m itting a stochastic interest rate and correlation of the underlying a sset's price with the interest rate is tested with daily closing pric es for Comex gold futures options. The stochastic interest-rate model is superior to a constant interest-rate model in predicting market p rices. The results suggest that interest-rate volatility is an import ant element in contingent-claims valuation.
Publication
The Journal of Finance
Volume
42
Issue
5
Pages
1187-94
Date
1987-12
Citation
Bailey, W. B. (1987). An Empirical Investigation of the Market for Comex Gold Futures Options. The Journal of Finance, 42, 1187–1194.
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