This thesis examines the KTB Futures price using the Hull and White one factor model, which is the no-arbitrage approach model by the Hull and White. This thesis, unlike earlier studies that deal with pricing interest-sensitive claims using arbitrage-free models, employs time-varying conditional volatilities and compares the empirical performance with the case using the constant-volatility. Then this also investigates the price difference between the market prices and the theoretical ones.
As a result, the KTB Futures market prices are undervalued on average compared to the theoretical ones, and both of the constant volatility and the time-varying volatility cases are overpriced. Furthermore, regarding the effect of the volatility, the constant and time-varying conditional volatilities have little effects on the valuation of the theoretical prices on the KTB Futures contracts.
