An empirical comparison of forward-rate and spot-rate models for valuing interest-rate options

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Abstract

Our main goal is to investigate the question of which interest-rate options valuation models are better suited to support the management of interest-rate risk. We use the German market to test seven spot-rate and forward-rate models with one and two factors for interest-rate warrants for the period from 1990 to 1993. We identify a one-factor forward-rate model and two spot-rate models with two factors that are not significantly outperformed by any of the other four models. Further rankings are possible if additional criteria are applied.

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CITATION STYLE

APA

Bühler, W., Uhrig-Homburg, M., Walter, U., & Weber, T. (1999, February 1). An empirical comparison of forward-rate and spot-rate models for valuing interest-rate options. Journal of Finance. Blackwell Publishing Inc. https://doi.org/10.1111/0022-1082.00104

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