Forward measure

In finance, a T-forward measure is a pricing measure absolutely continuous with respect to a risk-neutral measure, but rather than using the money market as numeraire, it uses a bond with maturity T. The use of the forward measure was pioneered by Farshid Jamshidian (1987), and later used as a means of calculating the price of options on bonds.[1]

  1. ^ Jamshidian, Farshid (1989), "An Exact Bond Option Pricing Formula", The Journal of Finance, 44: 205–209, doi:10.1111/j.1540-6261.1989.tb02413.x