Tham khảo tài liệu 'quantitative bond markets analysis_12', tài chính - ngân hàng, đầu tư chứng khoán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 48 CHAPTER 22 Interest-Rate Options OPTION PRICE__ Six factors will influence the option price 1. Current price of the underlying instrument 2. Strike price 3. Time to expiration 4. Short-term risk-free interest rate over the life of the option 5. Coupon rate on the bond 6. Expected volatility of yields or prices over the life of the option The impact of each of these factors may depend on whether 1 the option is a call or a put 2 the option is an American option or a European option and 3 the underlying instrument is a bond or a futures contract on a Current Price of the Underlying Instrument For a call option as the current price of the underlying instrument increases decreases the option price increases decreases . For a put option as the current price of the underlying instrument decreases increases the option price increases decreases . Strike Price All other factors being constant the higher the strike price the lower the price of a call option. For a put option the opposite is true The higher the strike price the higher the price of a put option. Time to Expiration For American options both puts and calls all other factors held constant the longer the time to expiration the higher the option price. No general statement can be made for European options. The impact of the time to expiration on European options will depend on whether the option is a put or a call. Short-Term Risk-Free Interest Rate over the Life of the Option Holding all other factors constant the price of a call option on a bond will increase as the short-term risk-free interest rate rises. For a put option the opposite is true An increase in the short-term risk-free interest rate will decrease the price of a put option. In contrast for a futures option the price of both a call and a put option will decrease if the shortterm risk-free interest rate Coupon Rate For options on bonds coupons tend to reduce the .
