An empirical comparison of forward-rate and spot-rate models for valuing interest-rate options
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.
|Zugehörige Institution(en) am KIT
||Institut für Finanzwirtschaft, Banken und Versicherungen (FBV)
KITopen ID: 1000016923
||Journal of Finance
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