|Institution:||University of Oslo|
|Full text PDF:||http://urn.nb.no/URN:NBN:no-39744
In this thesis we derive the price of a spread option based on two zero-coupon bonds. The two bonds will represent di erent nancial markets, and the HJM framework is used as the model for the underlying forward rates. We evaluate the resulting pricing formula with respect to the correlation between, and the volatility of, these forward rates and reflect on its ability to properly model such derivatives.