IDEAS home Printed from https://ideas.repec.org/a/taf/quantf/v12y2012i11p1663-1678.html
   My bibliography  Save this article

Pricing the Chicago Board of Trade T-Bond futures

Author

Listed:
  • Ramzi Ben-Abdallah
  • Hatem Ben-Ameur
  • Michèle Breton

Abstract

The aim of this paper is to investigate the pricing of the Chicago Board of Trade (CBOT) Treasury-Bond futures. The difficulty in pricing it arises from its multiple inter-dependent embedded delivery options, which can be exercised at various times and dates during the delivery month. We consider a general Markov diffusion process model for stochastic interest rates and propose a pricing algorithm that can handle all the delivery rules embedded in the CBOT T-Bond futures. Our procedure combines dynamic programming, finite-elements approximation, and fixed-point evaluation. Numerical illustrations are provided under the one-factor Vasicek and Cox--Ingesoll--Ross models, and under the time in-homogeneous Hull--White model.

Suggested Citation

  • Ramzi Ben-Abdallah & Hatem Ben-Ameur & Michèle Breton, 2012. "Pricing the Chicago Board of Trade T-Bond futures," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1663-1678, November.
    • Handle: RePEc:taf:quantf:v:12:y:2012:i:11:p:1663-1678
    DOI: 10.1080/14697688.2011.573496
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/14697688.2011.573496
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14697688.2011.573496?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ramzi Ben-Abdallah & Michèle Breton, 2017. "An ex-post analysis of the CME Group’s solution to the 5-year gap issue," Applied Economics, Taylor & Francis Journals, vol. 49(60), pages 5992-6002, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:12:y:2012:i:11:p:1663-1678. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RQUF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.