Pricing an interest rate option is a complex process,but a simple approach can be taken by applying the Cox model in this context.

Question

Quizplus · Accepted Answer

The Cox model is not directly used for pricing interest rate options. Instead, models like the Black-Scholes model, the Cox-Ross-Rubinstein model, or interest rate models like the Vasicek, Cox-Ingersoll-Ross (CIR), or Black-Derman-Toy (BDT) models are typically used for pricing options, including those on interest rates.

Pricing an Interest Rate Option Is a Complex Process,but a Simple