Valuation of Callable Bonds

This master’s thesis explores pricing of callables. These are special bonds that allow the issuer at a number of certain times to buy back the bond. Three different models for the short-term interest rate; Hull and Whites model, Black, Derman and Toys model as well as Black and Karsinsikis model have been adjusted for pricing callables. The models have been implemented in Quantlab, a program for quantitative analysis, and pricing is done according to real-time data.