Pricing of LIBOR futures by martingale method in Cox-Ingersoll-Ross model

This paper considers the pricing of LIBOR futures in the Cox-Ingersoll-Ross (CIR) model under Pozdnyakov and Steele (2004)’s martingale framework for futures prices. Under the CIR model for short term interest rate, we prove that there exists a unique futures price process associated with the terminal value and the standard financial market, and that this unique futures price process has a martingale representation. Moreover, a general closed-form pricing formula for LIBOR futures contracts is obtained in the CIR model.