Modelling the Uruguayan debt through Gaussians models

DOI10.1007/978-3-319-32543-9_17MaRDI QIDQ4606782zbMATH OpenOpenAlexFDO

Authors Ernesto Mordecki, Andrés Sosa

Publication date 9 March 2018

Published in Trends in Mathematical Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1508.00108

zbMATH Keywords

arbitrage possibilitiesforward-rate modelsinterest rate modelsstochastic processesterm structure surfaceUruguayan sovereign bondsyield curve

Mathematics Subject Classification ID

Applications of statistics to actuarial sciences and financial mathematics (62P05) Derivative securities (option pricing, hedging, etc.) (91G20) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Abstract: We model bond's price curves corresponding to the sovereign uruguayan debt nominated in USD, as an alternative to the official bond prices publication released by the Central Bank of Uruguay (CBU). Four different gaussian models are fitted, based on historical data issued by the CBU, corresponding to some of the more frequently traded bonds. The main difficulty we approach is the absence of liquidity in the bond market. Nevertheless the adjustment is relatively good, giving the possibility of non-arbitrage pricing of the whole family of non traded instruments, and also the possibility of pricing derivative securities.

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Cites work

• A general Gaussian interest rate model consistent with the current term structure
• A theory of the term structure of interest rates
• An equilibrium characterization of the term structure
• Arbitrage Theory in Continuous Time
• Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
• Interest rate models -- theory and practice. With smile, inflation and credit
• Martingale methods in financial modelling.
• Term-structure models. A graduate course

Cited in

(1)

• Pricing bond options in emerging markets: a case study

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