Valuation of Bid and Ask Prices for Cap and Floor Contracts In a Fractional Vasicek Model

This paper derives bid and ask formulas for cap and floor contracts by using Wang trans- form under fractional version of the Vasicek interest rate model. To do this, first the parameters of the model are estimated by MLE calibration method, then standard and fractional version of the Vasicek model are compared by the Akaike information criterion. Finally, we use the model with the set of calibration parameters to calculate Bid-Ask boundaries for interest rate amount and cap and floor prices.