Another Look at the Ho-Lee Bond Option Pricing Model

Young Shin Kim, Stoyan Stoyanov, Svetlozar Rachev and Frank Fabozzi ()

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.

Date: 2017-12
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Published in The Journal of Derivatives Summer 2018, 25 (4) 48-53

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1712.06664

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