Abstract

HERRERA CARDONA, Luis Guillermo  and  CARDENAS GIRALDO, Darwin. Fixed income option pricing models: application to the colombian market. estud.gerenc. [online]. 2013, vol.29, n.126, pp.77-85. ISSN 0123-5923.

This paper is to evaluate the applicability of the Vasicek (1977) model of interest rate for valuing call and put options on a fixed income Colombian security. For the development of this application are made, some econometric estimation with volatility and autoregressive processes, these are necessary to find the model input parameters. The progress of the model. Later on in the work finds that the model does not give satisfactory results for options on Colombian bonds due to the high value of premiums. However, by adjusting the model parameters based on empirical criteria consistent figures are obtained.

Keywords : Interest rate evolution models; Speed of reversion; Vasicek model; Call and put option pricing; Black-76 model.

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