A test of the beta model on Eurodollar futures options
Author:
Les Gulko a
| Affiliation: | a Suite 3C, Stamford, CT 06902, USA |
DOI:
10.1080/14697680601059924
Publication Frequency:
8 issues per year
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Abstract
The paper reports empirical tests of the beta model for pricing fixed-income options. The beta model resembles the Black-Scholes model with the lognormal probability distribution replaced by a beta probability distribution. The test is based on 32 817 daily prices of Eurodollar futures options and concludes that the beta model is more accurate than alternative option pricing models.
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| Keywords: Empirical tests; Entropy; Fixed-income options; Incomplete markets |
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