On the Determinants of the Value of Call Options on Default-Free Bonds

29 Pages Posted: 19 Jun 2004 Last revised: 31 May 2021

See all articles by Stephen A. Buser

Stephen A. Buser

Ohio State University (OSU) - Department of Finance

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Anthony B. Sanders

George Mason University - School of Business

Date Written: March 1988

Abstract

Models of interest-dependent claims that imply similar term structures and levels of interest rate volatility also produce similar estimates of bond option values. This result is established for simple option forms with known closed-form solutions as well as for more complex options that require numerical methods for evaluation. The finding is confirmed for a wide range of economic conditions, and it is robust with respect to the number and nature of factors that generate interest-rate movements.

Suggested Citation

Buser, Stephen and Hendershott, Patric H. and Sanders, Anthony Bown, On the Determinants of the Value of Call Options on Default-Free Bonds (March 1988). NBER Working Paper No. w2529, Available at SSRN: https://ssrn.com/abstract=425562

Stephen Buser

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-5719 (Phone)

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Anthony Bown Sanders

George Mason University - School of Business ( email )

Fairfax, VA 22030
United States

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