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A Bound on LIBOR Futures Prices
Feb 21, 2001
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| Abstract: We prove that for a large class of widely used term structure models there is a simple theoretical upper bound for value of LIBOR futures prices. When this bound is compared to observed futures prices, one nevertheless finds that the theoretical bound is sometimes violated by market prices. The main consequence of this observation is that virtually all of the important fixed income models have theoretical implications that are sometimes at odds with market realities, at least when they are applied to futures markets. |
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2001 Purdue University Last Update: July 10, 2001 Please send comments and suggestions to the Webmaster. |