An empirical test of the commodity option pricing model using ginnie mae call options

This paper tests the ability of Black's commodity option pricing model to provide prices for over‐the‐counter Ginnie Mae call options, which are not significantly different from actual market prices. The test is applied to a unique data set on option prices and Ginnie Mae forward contracts, furnished by a brokerage house specializing in trading government‐backed securities. The model generates prices close to those actually available when trading is reasonably active.