Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.physa.2006.04.021
Title: Price of coupon bond options in a quantum field theory of forward interest rates
Authors: Baaquie, B.E. 
Keywords: Coupon bond option
Forward interest rates
Quantum field theory
Issue Date: 1-Oct-2006
Citation: Baaquie, B.E. (2006-10-01). Price of coupon bond options in a quantum field theory of forward interest rates. Physica A: Statistical Mechanics and its Applications 370 (1) : 98-103. ScholarBank@NUS Repository. https://doi.org/10.1016/j.physa.2006.04.021
Abstract: European options on coupon bonds are studied in a quantum field theory model of forward interest rates. A approximation scheme for finding the option price is developed based on the fact that the volatility of the forward interest rate is a small quantity. The field theory for the forward interest rates is in effect Gaussian, and when the payoff function for the coupon bonds option is included it makes the field theory exponentially nonlinear. A Feynman perturbation expansion gives a result for the price of Libor swaption that agrees quite well with the market price. © 2006 Elsevier B.V. All rights reserved.
Source Title: Physica A: Statistical Mechanics and its Applications
URI: http://scholarbank.nus.edu.sg/handle/10635/97605
ISSN: 03784371
DOI: 10.1016/j.physa.2006.04.021
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