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An Exact Bond Option Formula
The Journal of Finance
Vol. 44, No. 1 (Mar., 1989), pp. 205-209
Stable URL: http://www.jstor.org/stable/2328284
Page Count: 5
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This paper derives a closed-form solution for European options on pure discount bonds, assuming a mean-reverting Gaussian interest rate model as in Vasicek . The formula is extended to European options on discount bond portfolios.
The Journal of Finance © 1989 American Finance Association