How do you price calendar spread options, that is, options on the same underlying and the same strike but different times to maturity?
Clarification: I'm interested in the pricing of a a CSO (calender spread option) as defined by CME Group. Following their definition, the payout of the option at expiry is (price of long nearby futures contract (e.g. September 2008) - price of deferred futures contract (e.g. September 2009) ). (Thanks to user508 for the link and clarification below).
This means the question is still open, and I would be really interested in an answer.