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Forward Measures

  • Damir Filipović
Chapter
Part of the Springer Finance book series (FINANCE)

Abstract

In this chapter we replace the risk-free numeraire by another traded asset, such as the T-bond. This change of numeraire technique proves most useful for option pricing and provides the basis for the market models studied below. We derive explicit option price formulas for Gaussian HJM models. This includes the Vasiček short-rate model and some extension of the Black–Scholes model with stochastic interest rates.

Keywords

Option Price Forward Rate Bond Price Scholes Model European Call Option 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  1. 1.University of Vienna, and Vienna University of Economics and BusinessViennaAustria

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