New models revolutionize bond options pricing for better financial decisions.
The article explores different models for interest rate derivatives based on the spot interest rate. They use the Vasicek approach to develop models like Vasicek, Hull-White, and Cox-Ingersoll-Ross. They also create a framework for pricing bond options and find solutions for options under Hull-White and Cox-Ingersoll-Ross models. The researchers discuss how to adjust the Hull-White model to match real-world yield curves.