Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Bond pricing in a hidden Markov model of the short rate
KTH, Superseded Departments, Mathematics.
2000 (English)In: Finance and Stochastics, ISSN 0949-2984, E-ISSN 1432-1122, Vol. 4, no 4, 371-389 p.Article in journal (Refereed) Published
Abstract [en]

We consider a diffusion type model for the short rate, where the drift and diffusion parameters are modulated by an underlying Markov process. The underlying Markov process is assumed to have a stochastic differential driven by Wiener processes and a marked point process. The model for the short rate thus falls within the category of hidden Markov models. For this model we look at the bond pricing problem. In order to obtain more concrete results we introduce the notion of a semi-affine term structure and give sufficient conditions for the existence of such a term structure. For a special case, when the underlying process is a Markov chain with only two states, we obtain a closed form expression for bond prices. Furthermore we consider the pricing problem when the modulating process can not be directly observed. It turns out that pricing in this context may be viewed as a filtering problem.

Place, publisher, year, edition, pages
2000. Vol. 4, no 4, 371-389 p.
Keyword [en]
Bond market, term structure of interest rates, regime shifts, hidden Markov model
National Category
Computational Mathematics
Identifiers
URN: urn:nbn:se:kth:diva-12540DOI: 10.1007/PL00013526OAI: oai:DiVA.org:kth-12540DiVA: diva2:317758
Note
QC 20100505Available from: 2010-05-05 Created: 2010-05-05 Last updated: 2017-12-12Bibliographically approved
In thesis
1. On the term structure of forwards, futures and interest rates
Open this publication in new window or tab >>On the term structure of forwards, futures and interest rates
2001 (English)Doctoral thesis, comprehensive summary (Other scientific)
Place, publisher, year, edition, pages
Stockholm: KTH, 2001. x, 20 p.
Series
Trita-MAT. OS, ISSN 1401-2294 ; 01-OS-01
Keyword
Term structure, Markovian realizations, affine term structures.
National Category
Computational Mathematics
Identifiers
urn:nbn:se:kth:diva-3086 (URN)993-435766-6 (ISBN)
Public defence
2001-02-16, 00:00 (English)
Note
QC 20100505Available from: 2001-02-14 Created: 2001-02-14 Last updated: 2010-05-05Bibliographically approved

Open Access in DiVA

No full text

Other links

Publisher's full text

Search in DiVA

By author/editor
Landén, Camilla
By organisation
Mathematics
In the same journal
Finance and Stochastics
Computational Mathematics

Search outside of DiVA

GoogleGoogle Scholar

doi
urn-nbn

Altmetric score

doi
urn-nbn
Total: 88 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf