Portal de Periódicos da CAPES

ISOLATING THE WILD CARD OPTION

1995; Wiley; Volume: 5; Issue: 2 Linguagem: Inglês

10.1111/j.1467-9965.1995.tb00107.x

1467-9965

Hugh Cohen,

Insurance, Mortality, Demography, Risk Management

Many embedded options are difficult to value the wild card option in the Treasury bond futures contract is one of these embedded options. We illustrate how narrow theoretical bounds on the value of this option, relative to the price of the contract, may be obtained in the presence of other embedded options. Simulations suggest that the value of the wild card option is close to zero. This implies that, in this economy, a simpler pricing model of the Treasury bond futures contract, which ignores the wild card option, will result in only a small loss of accuracy.