The option pricing framework

In chapter (8) we review and conclude our results and give ideas for further extensions of this work. 

In the following, we derive a theoretical pricing framework for the computation of options on bond applying standard Fourier inversion techniques. Starting with a plain vanilla European option on a zero-coupon bond with the strike price K, maturity T of the underlying bond and exercise date To of the option, we have 

Furthermore, we want to be consistent with our lEE approach, where the price of the coupon-bond options can only be computed by summing over the single exercise probabilities Up [AT] 

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