Levy-Based Interest Rate Derivatives
Author | : Anatoliy V. Swishchuk |
Publisher | : |
Total Pages | : 0 |
Release | : 2009 |
ISBN-10 | : OCLC:1376497126 |
ISBN-13 | : |
Rating | : 4/5 (26 Downloads) |
Download or read book Levy-Based Interest Rate Derivatives written by Anatoliy V. Swishchuk and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we show how to calculate the price of zero-coupon bonds for many Gaussian and Levy one-factor and multi-factor models of r(t) using change of time method. These models include, in particular, Ornshtein-Uhlenbeck (1930), Vasicek (1977), Cox-Ingersoll-Ross (1985), continuous-time GARCH, Ho-Lee (1986), Hull-White (1990) and Heath-Jarrrow-Morton (1992) models and their various combinations. We also derive partial integro-differential equations (PIDEs) for the values of swaps, caps, floors and options on them, swaptions, captions and floortions, respectively. We apply the change of time method to price the interest rate derivatives for the interest rates r(t) described by various stochastic differential equations driven by alpha-stable Levy processes.