The Continuous-Time Ehrenfest Process in Term Structure Modelling

DOI10.1239/JAP/1285335404MaRDI QIDQ4933194zbMATH OpenOpenAlexFDO

Authors

Publication date 12 October 2010

Published in Journal of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1003.6042

zbMATH Keywords

Ehrenfest modelinterest rate derivativeshort rateterm structureVasicek modelzero-coupon bond

Mathematics Subject Classification ID

Orthogonal polynomials and functions associated with root systems (33C52) Applications of continuous-time Markov processes on discrete state spaces (60J28) Derivative securities (option pricing, hedging, etc.) (91G20) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Abstract: In this paper, a finite-state mean-reverting model for the short-rate, based on the continuous time Ehrenfest process, will be examined. Two explicit pricing formulae for zero-coupon bonds will be derived in the general and the special symmetric cases. Its limiting relationship to the Vasicek model will be examined with some numerical results.

Recommendations

• scientific article; zbMATH DE number 953313
• Dynamic term structure modeling beyond the paradigm of absolute continuity
• Continuous-time term structure models: Forward measure approach
• A survey of stochastic continuous time models of the term structure of interest rates
• MODELING TERM STRUCTURE DYNAMICS: AN INFINITE DIMENSIONAL APPROACH
• scientific article; zbMATH DE number 2042814
• A general framework for term structure models driven by Lévy processes
• Staying at zero with affine processes: an application to term structure modelling

Cites work

• An equilibrium characterization of the term structure
• An interest rate model with upper and lower bounds
• Asymptotic distributions for the Ehrenfest urn and related random walks
• Continuous and discrete models in finance, in particular for stochastic interest rates
• Ehrenfest model with large jumps in finance
• Ehrenfest urn models
• Fluctuation Theory for the Ehrenfest urn
• scientific article; zbMATH DE number 3736679 (Why is no real title available?)
• scientific article; zbMATH DE number 852306 (Why is no real title available?)
• scientific article; zbMATH DE number 3274494 (Why is no real title available?)
• scientific article; zbMATH DE number 4188933 (Why is no real title available?)
• Interest rate models -- theory and practice
• Markov Chains
• Martingale Measures For A Class of Right‐Continuous Processes
• Mean passage times for tridiagonal transition matrices and a two-parameter ehrenfest urn model
• NUMERICAL EXPLORATION OF DYNAMIC BEHAVIOR OF ORNSTEIN-UHLENBECK PROCESSES VIA EHRENFEST PROCESS APPROXIMATION(<Special Issue>Advanced Planning and Scheduling for Supply Chain Management)
• On the Approach to Statistical Equilibrium
• The efficient evaluation of the hypergeometric function of a matrix argument
• Total positivity, spherical series, and hypergeometric functions of matrix argument

Cited in

(1)

• The persistent-transitory representation for earnings processes

This page was built for publication: The Continuous-Time Ehrenfest Process in Term Structure Modelling

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4933194)