Bid And Ask Spreads For The Cap And Floor Contracts Under The Liouville Fractional Vasicek Model

This paper presents bid and ask formulas for cap and floor contract prices by using Wang transform under a Liouville fractional Vasicek (LfVasicek) interest rate model. To do this, the parameters of the model are calibrated by using the Newton-Raphson method. Then the standard and Liouville fractional versions of the Vasicek model are compared by the Bayes information criterion (BIC). Finally, we obtain the bid-ask boundaries for interest rate amount and cap and floor prices.