Estimation of bid-ask prices for options on LIBOR based instruments

被引：6
|
作者：
Sonono, Masimba Energy [1 ]
Mashele, Hopolang Phillip [2 ]
机构：
[1] North West Univ, Fac Econ & Management Sci, Potchefstroom Campus,Private Bag X6001, ZA-2520 Potchefstroom, South Africa
[2] North West Univ, Ctr Business Math & Informat, Potchefstroom Campus,Private Bag X6001, ZA-2520 Potchefstroom, South Africa
来源：
FINANCE RESEARCH LETTERS | 2016年 / 19卷
关键词：
Interest rate; LIBOR; Caps; Floors; Bid-ask prices; Wang transform; SPREADS;
D O I：
10.1016/j.frl.2016.05.013
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
Interest rate options are the most liquid traded derivatives in the markets. We observe the following from the markets: (i) Market dealers usually quote the mid-price. The mid-price is a subjective and hypothetical price. (ii) OTC interest rate options market are incomplete, and options cannot always be costlessly replicated. (iii) The bid-ask prices are not widely available for the market as a whole. With these observations in mind, we propose an approach to estimate the bid-ask prices for options on LIBOR based instruments. In particular, we assess the proposed approach in the determination of premiums for caps and floors. (C) 2016 Elsevier Inc. All rights reserved.
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页码：33 / 41
页数：9
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