On the information in the interest rate term structure and option prices

被引：1

作者：

De Jong F. ^{[1
]}

Driessen J. ^{[1
]}

Pelsser A. ^{[2
]}

机构：

[1] Finance Group, University of Amsterdam, 1018 WB, Amsterdam

[2] Econometric Institute, Erasmus University Rotterdam, Actuarial Department

来源：

Review of Derivatives Research | 2004年 / 7卷 / 2期

关键词：

Interest rate derivatives; Term structure models; Volatility hump;

D O I：

10.1023/B:REDR.0000031175.79497.7f

中图分类号：

学科分类号：

摘要：

We examine whether the information in cap and swaption prices is consistent with realized movements of the interest rate term structure. To extract an option-implied interest rate covariance matrix from cap and swaption prices, we use Libor market models as a modelling framework. We propose a flexible parameterization of the interest rate covariance matrix, which cannot be generated by standard low-factor term structure models. The empirical analysis, based on US data from 1995 to 1999, shows that option prices imply an interest rate covariance matrix that is significantly different from the covariance matrix estimated from interest rate data. If one uses the latter covariance matrix to price caps and swaptions, one significantly underprices these options. We discuss and analyze several explanations for our findings.

引用

页码：99 / 127

页数：28

共 42 条

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