| Abstract: | Turnbull (1995) as well as Navatte and Quittard-Pinon (1999) derived explicit pricing formulae for digital options and range notes in a one-factor Gaussian Heath–Jarrow–Morton (henceforth HJM) model. Nunes (2004) extended their results to a multifactor Gaussian HJM framework. In this paper, we generalize these results by providing explicit pricing solutions for digital options and range notes in the multivariate Lévy term-structure model of Eberlein and Raible (1999) , that is, an HJM-type model driven by a d -dimensional (possibly nonhomogeneous) Lévy process. As a byproduct, we obtain a pricing formula for floating range notes in the special case of a multifactor Gaussian HJM model that is simpler than the one provided by Nunes (2004) . |
