yrnd - Extracts Risk Neutral Densities of Prices, Money Market Rates and Government Bond Yields from Interest Rates Futures Options Prices

Provides with parametric Risk Neutral Densities (RNDs) and cumulative densities of futures prices on fixed-income products, relying on options on Short Term Interest Rate futures or options on government bond futures. It models the futures price at options' maturity as a mixture of lognormal densities. Leveraging on this, the package provides with the RNDs and cumulative densities of the money market rate or the government bond yield inferred from the futures price, using the RND of the futures price. The package also extracts from options prices on bond futures in one go the RND of the cheapest-to-deliver (ctd) bond repo rate from options' to futures' maturity and the RND of the ctd bond yield at options' maturity. The package also provides with the probability attached to each bond in the delivery basket of a government bond futures to be the cheapest at options' maturity from an examination of either the implied repo rate or the net basis of bonds in the delivery basket, as well as the value of the quality option embedded in the futures contract. At last, the package provides with the non parametric distribution of the spread between either two bond yields or two bond repo rates, using two RNDs based on options on bond futures of the same maturity. The package leverages on the works of Melick, W. R. and Thomas, C. P. (1997) <doi:10.2307/2331318> and B. Bahra (1998) <doi:10.2139/ssrn.77429>.