Abstract
This paper develops a discrete time model for valuing treasury bills and either forward or futures contracts written against them. It provides formulae for bill prices, forward prices, futures prices, and their conditional variances and risk premiums. The interest rate process is described by a multiplicative binomial random walk whose features conform to some principal characteristics of observed processes. Initial forward rates are constrained to match initially observed term structure data.
Volume
23:1
Page
3-22
Year
1994
Categories
Financial and Statistical Methods
Asset and Econometric Modeling
Asset Classes
Treasury Bonds
Financial and Statistical Methods
Statistical Models and Methods
Time Series
Publications
ASTIN Bulletin
