The market for trading options on fixed income ETFs like HYG has become increasingly prominent in the past couple years, but I've been unable to find any discussion related to the pricing methodology of these securities. I suspect the pricing method is quite different from that used for options on equity ETFs like SPY, given that the underlying assets for fixed income ETFs are bonds with interest-rate sensitivities.

If anyone has insight into pricing methods or can direct me towards resources that might help, that'd be greatly appreciated.


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