Convergence analysis for zero‑coupon bond options via CTMC

Extend the CTMC error and convergence analysis to zero‑coupon bond option pricing under one‑dimensional time‑inhomogeneous short‑rate models by establishing rigorous convergence rates and conditions.

Background

The paper derives a closed‑form matrix expression for zero‑coupon bond options and demonstrates empirical convergence and accuracy across models. However, a rigorous convergence analysis tailored to these options is not provided.

Existing CTMC convergence results for one‑dimensional models address European and barrier options; adapting these analyses to zero‑coupon bond options is identified as future work.