An Empirical Comparison of Forward-Rate and Spot-Rate Models for Valuing Interest-Rate Options

@inproceedings{Bhler1998AnEC,
  title={An Empirical Comparison of Forward-Rate and Spot-Rate Models for Valuing Interest-Rate Options},
  author={Wolfgang J. B{\"u}hler and MARLIESE UHRIG-HOMBURG and Ulrich Walter and Thomas Weber},
  year={1998}
}
Our main goal is to investigate the question of which interest-rate options valuation models are better suited to support the management of interest-rate risk. We use the German market to test seven spot-rate and forward-rate models with one and two factors for interest-rate warrants for the period from 1990 to 1993. We identify a one-factor forward-rate model and two spot-rate models with two factors that are not significantly outperformed by any of the other four models. Further rankings are… CONTINUE READING
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