Discontinuous Interest Rate Processes
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Author | : Mukarram Attari |
Publisher | : |
Total Pages | : 33 |
Release | : 2012 |
Genre | : |
ISBN | : |
This paper obtains equilibrium interest rate option prices for discontinuous short-term interest rate processes. The prices are first obtained for a general distribution of jump sizes using a process with a number of fixed sized jumps. The option price is the expectation, over the number and timing of jumps, of the option price given the number and timing of the jumps. This is similar in form to Merton's jump-diffusion option pricing formula for stock options. The differences are that (i) this paper does not need the assumption that jump risk is not priced and (ii) the timing of the jumps is also important. The pricing formulas are then used to obtain option prices when the jump distribution is known to be one of the continuous distributions. The commonly used jump-diffusion and stochastic volatility diffusion option prices can be obtained as limiting cases. The paper shows how portfolios to hedge derivative securities can be built.
Author | : Steven L. Heston |
Publisher | : |
Total Pages | : |
Release | : 1998 |
Genre | : |
ISBN | : |
This paper develops an equilibrium model in which interest rates follow a discontinuous (generalized) gamma process. The gamma process has finite variation, takes an infinite number of quot;smallquot; jumps in every interval, and includes the Wiener process as a limiting case. The gamma interest rate model produces yield curves that closely resemble those of diffusion models. But in contrast to diffusion models, the curvature of the yield curve does not directly depend on the true volatility of the interest rate process, but instead depends on a different risk-neutral volatility. The gamma model appears to fit the distribution of interest rates changes and the jump characteristics of interest rate paths. Empirical tests reject a diffusion model of interest rates in favor of the more general gamma model because daily interest rate innovations are highly leptokurtic.
Author | : Elyès Jouini |
Publisher | : Cambridge University Press |
Total Pages | : 324 |
Release | : 2001 |
Genre | : Derivative securities |
ISBN | : 9780521792370 |
This 2001 handbook surveys the state of practice, method and understanding in the field of mathematical finance. Every chapter has been written by leading researchers and each starts by briefly surveying the existing results for a given topic, then discusses more recent results and, finally, points out open problems with an indication of what needs to be done in order to solve them. The primary audiences for the book are doctoral students, researchers and practitioners who already have some basic knowledge of mathematical finance. In sum, this is a comprehensive reference work for mathematical finance and will be indispensable to readers who need to find a quick introduction or reference to a specific topic, leading all the way to cutting edge material.
Author | : Moorad Choudhry |
Publisher | : John Wiley & Sons |
Total Pages | : 407 |
Release | : 2019-04-15 |
Genre | : Business & Economics |
ISBN | : 1119141052 |
Understand and interpret the global debt capital markets Now in a completely updated and expanded edition, this is a technical guide to the yield curve, a key indicator of the global capital markets and the understanding and accurate prediction of which is critical to all market participants. Being able to accurately and timely predict the shape and direction of the curve permits practitioners to consistently outperform the market. Analysing and Interpreting the Yield Curve, 2nd Edition describes what the yield curve is, explains what it tells participants, outlines the significance of certain shapes that the curve assumes and, most importantly, demonstrates what factors drive it and how it is modelled and used. Covers the FTP curve, the multi-currency curve, CSA, OIS-Libor and 3-curve models Gets you up to speed on the secured curve Describes application of theoretical versus market curve relative value trading Explains the concept of the risk-free rate Accessible demonstration of curve interpolation best-practice using cubic spline, Nelson-Siegel and Svensson 94 models This advanced text is essential reading for traders, asset managers, bankers and financial analysts, as well as graduate students in banking and finance.
Author | : Moorad Choudhry |
Publisher | : Elsevier |
Total Pages | : 268 |
Release | : 2015-08-28 |
Genre | : Business & Economics |
ISBN | : 0080999417 |
Each new chapter of the Second Edition covers an aspect of the fixed income market that has become relevant to investors but is not covered at an advanced level in existing textbooks. This is material that is pertinent to the investment decisions but is not freely available to those not originating the products. Professor Choudhry's method is to place ideas into contexts in order to keep them from becoming too theoretical. While the level of mathematical sophistication is both high and specialized, he includes a brief introduction to the key mathematical concepts. This is a book on the financial markets, not mathematics, and he provides few derivations and fewer proofs. He draws on both his personal experience as well as his own research to bring together subjects of practical importance to bond market investors and analysts. - Presents practitioner-level theories and applications, never available in textbooks - Focuses on financial markets, not mathematics - Covers relative value investing, returns analysis, and risk estimation
Author | : Narasimhan Jegadeesh |
Publisher | : John Wiley & Sons |
Total Pages | : 438 |
Release | : 1999-12-28 |
Genre | : Business & Economics |
ISBN | : 9780471254195 |
Presenting the most advanced thinking on the topic, this book covers the latest valuation models and techniques. It addresses essential topics such as the subtleties of fixed-income mathematics, new approaches to modeling term structures, and the applications of fixed-income valuation on credit risk, mortgages, munis, and indexed bonds.
Author | : Cheng-Few Lee |
Publisher | : Elsevier |
Total Pages | : 345 |
Release | : 2001-09-14 |
Genre | : Social Science |
ISBN | : 0080543979 |
This research annual publication intends to bring together investment analysis and portfolio theory and their implementation to portfolio management. It seeks theoretical and empirical research manuscripts with high quality in the area of investment and portfolio analysis. The contents will consist of original research on: The principles of portfolio management of equities and fixed-income securities. The evaluation of portfolios (or mutual funds) of common stocks, bonds, international assets, and options. The dynamic process of portfolio management. Strategies of international investments and portfolio management. The applications of useful and important analytical techniques such as mathematics, econometrics, statistics, and computers in the field of investment and portfolio management. Theoretical research related to options and futures. In addition, it also contains articles that present and examine new and important accounting, financial, and economic data for managing and evaluating portfolios of risky assets.
Author | : Compiled by the British Library of Political and Economic Science |
Publisher | : Psychology Press |
Total Pages | : 660 |
Release | : 2000-12-07 |
Genre | : |
ISBN | : 9780415240093 |
IBSS is the essential tool for librarians, university departments, research institutions and any public or private institution whose work requires access to up-to-date and comprehensive knowledge of the social sciences
Author | : Marek Musiela |
Publisher | : Springer Science & Business Media |
Total Pages | : 521 |
Release | : 2013-06-29 |
Genre | : Mathematics |
ISBN | : 3662221322 |
A comprehensive and self-contained treatment of the theory and practice of option pricing. The role of martingale methods in financial modeling is exposed. The emphasis is on using arbitrage-free models already accepted by the market as well as on building the new ones. Standard calls and puts together with numerous examples of exotic options such as barriers and quantos, for example on stocks, indices, currencies and interest rates are analysed. The importance of choosing a convenient numeraire in price calculations is explained. Mathematical and financial language is used so as to bring mathematicians closer to practical problems of finance and presenting to the industry useful maths tools.
Author | : Markus Bouziane |
Publisher | : Springer Science & Business Media |
Total Pages | : 207 |
Release | : 2008-03-18 |
Genre | : Business & Economics |
ISBN | : 3540770666 |
The author derives an efficient and accurate pricing tool for interest-rate derivatives within a Fourier-transform based pricing approach, which is generally applicable to exponential-affine jump-diffusion models.