Single factor models with Markovian spot interest rate: An analytical treatment (Q1397606): Difference between revisions
From MaRDI portal
Added link to MaRDI item. |
Set profile property. |
||
Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
Normal rank |
Revision as of 04:11, 5 March 2024
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | Single factor models with Markovian spot interest rate: An analytical treatment |
scientific article |
Statements
Single factor models with Markovian spot interest rate: An analytical treatment (English)
0 references
6 August 2003
0 references
This paper provides an analytic characterization of the bond prices in the class of single-factor Heath-Jarrow-Morton models in which the spot interest rate is a Markov process and the volatility structure of zero coupon bond returns is stochastic; Jeffrey's (1995) constraint is satisfied. The characterization involves a well-defined Volterra integral equation of the first kind. Under the generalized Cox-Ingersoll-Ross volatility assumption, and with an arbitrary initial term structure, it is shown that the Volterra equation can be solved by perturbation methods.
0 references
Heath-Jarrow-Morton model
0 references
Cox-Ingersoll-Ross model
0 references
Jeffrey constraint
0 references
Volterra integral equations
0 references
perturbation methods
0 references