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arXiv · 1712.06664

Another Look at the Ho-Lee Bond Option Pricing Model

Young Shin Kim·Stoyan Stoyanov·Svetlozar Rachev·Frank J. Fabozzi
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Abstract

In this paper, we extend the classical Ho-Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model. This is achieved with the introduction of a more flexible no-arbitrage condition in contrast to the one assumed in the Ho-Lee model.

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Young Shin Kim, Stoyan Stoyanov, Svetlozar Rachev, Frank J. Fabozzi. 2017-12-18. Another Look at the Ho-Lee Bond Option Pricing Model. https://doi.org/10.3905/jod.2018.25.4.048

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