Pricing CIR Yield Options by Conditional Moment Matching |
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| Authors: | Adrian Prayoga Nicolas Privault |
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| Institution: | 1.Division of Mathematical Sciences, School of Physical and Mathematical Sciences,Nanyang Technological University,Singapore,Singapore |
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| Abstract: | We propose an approximation scheme for the pricing of yield options in the CIR model using conditional moment matching based on the gamma and lognormal distributions. This method is fast and simple to implement, and it shows a high degree of accuracy without being subject to the numerical instabilities that can be encountered with more sophisticated approaches. |
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