Description
Extracts Risk Neutral Densities of Prices, Money Market Rates and Bond Yields from Fixed Income Options
Description
Provides with parametric risk neutral densities and cumulative densities for futures prices on fixed-income products. It relies on options on Short Term Interest Rate futures contracts prices or options on bond futures contracts prices. It models the price of the underlying asset as a mixture of either two or three lognormal densities. It also brings new functions which provide with risk neutral densities and cumulative densities of the money market rate or the bond yield inferred from the futures contract's price, using the density of the futures price. The package leverages on the works of Melick, W. R. and Thomas, C. P. (1997) <doi:10.2307/2331318> and B. Bahra (1998) <doi:10.2139/ssrn.77429>.