Options pricing models of interest rate index: a comparative of pricing methodologies applied to the Brazilian market
by João Luiz Chela; Rodolfo Rosina
International Journal of Financial Markets and Derivatives (IJFMD), Vol. 7, No. 1, 2019

Abstract: This paper proposes to compare two options pricing models of interest rate index used in the Brazilian market and verify the best performance model. The models compared are those of Heath-Jarrow-Morton (HJM) of Brace and Musiela (1994) and Black model with expectations of the Monetary Policy Committee Meeting (Comitê de Políticas Monetárias - COPOM) of De Genaro and Avellaneda (2012) that are used by diverse investors in the financial market. For the comparison of the models we used option structures, negotiated prices and the theoretical price calculated by the Brazilian Stock Exchange (B3). After the stress test and the results of the comparisons the Alan de Genaro (ADG) model pricing - proposed by De Genaro and Avellaneda (2012) - obtained better performance than HJM model, proving to be more adequate to the reality of the Brazilian index interest rates options.

Online publication date: Thu, 25-Jul-2019

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Financial Markets and Derivatives (IJFMD):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?


Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com