@inbook{3df2c2cc54fa4ae5bfddc3e157122a21,
title = "The Paradigm Interest Rate Option Problem",
abstract = "There are a number of instruments in interest rate markets that are equivalent to an option on an interest rate or an option on a bond. In this chapter we focus on the interest rate caps, which are call options on an interest rate. We show that they can be interpreted as a put option on a bond. The problem of pricing such bonds, and hence the interest rate cap, shall motivate much of the discussion in subsequent chapters. In the last section we briefly discuss the issues associated with the interest rate option problem that distinguish it from the option pricing problem in a world of deterministic interest rates.",
keywords = "Call Option, Hedging Portfolio, Interest Rate, Market Rate, Strike Price",
author = "Carl Chiarella and He, {Xue Zhong} and Nikitopoulos, {Christina Sklibosios}",
note = "Publisher Copyright: {\textcopyright} 2015, Springer-Verlag Berlin Heidelberg.",
year = "2015",
doi = "10.1007/978-3-662-45906-5_21",
language = "English",
series = "Dynamic Modeling and Econometrics in Economics and Finance",
publisher = "Springer Science and Business Media Deutschland GmbH",
pages = "431--437",
booktitle = "Dynamic Modeling and Econometrics in Economics and Finance",
}