Relationship With Caps and Floors
European Put options on zero coupon bonds can be seen to be equivalent to suitable caplets, i.e. interest rate cap components, whereas call options can be seen to be equivalent to suitable floorlets, i.e. components of interest rate floors. See for example Brigo and Mercurio (2001), who also discuss bond options valuation with different models.
Read more about this topic: Bond Option
Famous quotes containing the words relationship with, relationship, caps and/or floors:
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“The day was ending at it was the hour of which I do not want to speak, the hour without a name, when the sounds of evening ascended from all the floors of the prison in a procession of silence.”
—Albert Camus (1913–1960)