The potential approach in practice

DOI10.1142/S0219024918500218zbMATH Open1398.91627arXiv1204.5718OpenAlexW1581064702MaRDI QIDQ4565072FDOQ4565072

Authors: T. Kluge, L. C. G. Rogers 

Publication date: 7 June 2018

Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Abstract: The potential approach is a general and simple method for modelling interest rates, foreign exchange rates, and in principle other types of financial assets. This paper takes data on some liquid interest rate derivatives, and fits potential models using a small finite-state Markov chain as the base Markov process.

Full work available at URL: https://arxiv.org/abs/1204.5718

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zbMATH Keywords

Markov chainparticle filteringinterest ratespotential approach

Mathematics Subject Classification ID

Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.) (60J20) Numerical methods (including Monte Carlo methods) (91G60) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Cites Work

• A joint stock and bond market based on the hyperbolic Gaussian model
• The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates
• Asset Pricing Using Finite State Markov Chain Stochastic Discount Functions
• Risk Premia and Volatilities in a Nonlinear Term Structure Model
• Taking positive interest rates seriously
• THE MULTI-CURVE POTENTIAL MODEL
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Cited In (2)

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