Bid and Ask spreads for the cap and floor contracts under the Liouville fractional Vasicek model

• Autores: Farshid Mehrdoust
• Localización: Estudios de economía aplicada, ISSN 1133-3197, ISSN-e 1697-5731, Vol. 39, Nº 2, 2021 (Ejemplar dedicado a: Globalization of trade and its impact on economy)
• Idioma: inglés
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• Resumen

  • This paper presents bid and ask formulas for cap and floor contracts prices byusing Wang transform under a Liouville fractional Vasicek (LfVasicek) interest rate model. To do this, the parameters of the model are calibrated by using the Newton-Raphson (NR) method. Then the standard and Liouville fractional versions of the Vasicek model are compared by the Bayes information criterion (BIC). Finally, we obtain the bid-ask boundaries for interest rate amount and cap and foor prices.