Main category
Economics (Finance)
Abstract
A valuation model is presented for pricing an American style call option on the yield of Treasury bond. The payoff is positive if the yield exceeds a predetermined strike level. The model assumes the yield of an American Treasury bond to be a log-normally distributed stochastic process and uses Monte-Carlo simulation to price the deal as a European call option.
Further reading
https://ia801909.us.archive.org/25/items/osfbond-american-option/OSFbondAmericanOption.pdf
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