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Bond Market Model

Author

Listed:
  • ROBERTO BAVIERA

    (Abaxbank, corso Monforte, 34, I-20122 Milan, Italy)

Abstract

We describe the Bond Market Model, a multi-factor interest rate term structure model, where it is possible to price with Black-like formulas the three classes of over-the-counter plain vanilla options. We derive the prices of caps/floors, bond options and swaptions. A comparison with Libor Market Model and Swap Market Model is discussed in detail, underlining advantages and limits of the different approaches.

Suggested Citation

  • Roberto Baviera, 2006. "Bond Market Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(04), pages 577-596.
    • Handle: RePEc:wsi:ijtafx:v:09:y:2006:i:04:n:s0219024906003640
    DOI: 10.1142/S0219024906003640
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