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The Pricing of Option on Bond Forwards

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We derive closed-form solutions for the equilibrium prices of bonds, bond forwards, bond futures, options on the bond forwards and options on the bond futures when the interest rate is stochastic. The prices of options on the bond forwards are shown to be greater than the prices of option on the corresponding bond futures.

Abstract

Ⅰ. Introduction

Ⅱ. Bond Forwards and Bond Futures

Ⅲ. Options on Bond, Bond Futures, and Bond Forwards

Ⅳ. Conclusion

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