Conditional Gaussian models of the term structure of interest rates (Q1409833): Difference between revisions
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Latest revision as of 20:58, 19 March 2024
scientific article
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English | Conditional Gaussian models of the term structure of interest rates |
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Conditional Gaussian models of the term structure of interest rates (English)
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22 October 2003
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A new family of yield curve models is proposed in which increments in the log ``one-plus-interest-rates'' are assumed to be one-step conditionally Gaussian. A non-arbitrage condition is derived for such models. It is demonstrated that the discrete-time models of this type can be imbedded in continuous time models of the whole yield curve. The valuation of ``non-kernel'' claims is described. Derivatives valuation and conditional heteroscedasticity models are considered as examples.
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market models
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interest rate model
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conditionally Gaussian
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