Name
Title | ||
|---|---|---|
A deterministic–shift extension of analytically–tractable and time–homogeneous short–rate models |
Abstract | ||
|---|---|---|
. In the present paper we show how to extend any time-homogeneous short-rate model to a model that can reproduce any observed
yield curve, through a procedure that preserves the possible analytical tractability of the original model. In the case of
the Vasicek (1977) model, our extension is equivalent to that of Hull and White (1990), whereas in the case of the Cox-Ingersoll-Ross
(1985) (CIR) model, our extension is more analytically tractable and avoids problems concerning the use of numerical solutions.
We also consider the extension of time-homogeneous models without analytical formulas. We then explain why the CIR model is
the most interesting model to be extended through our procedure, analyzing it in detail. We also consider an example of calibration
to the cap market for two of the presented models. We finally hint at the same extension for multifactor models and explain
its advantages for applications. |
Year | DOI | Venue |
|---|---|---|
2001 | 10.1007/PL00013541 | Finance and Stochastics |
Keywords | Field | DocType |
exponential vasicek model,short-rate models,cox-ingersoll-ross' model,calibration to market data,analytical tractability,cox ingersoll ross model,cox ingersoll ross,yield curve | Short rate,Applied mathematics,Mathematical economics,Mathematical optimization,Yield curve,Homogeneous,Vasicek model,Hull,Mathematics,Cox–Ingersoll–Ross model | Journal |
Volume | Issue | Citations |
5 | 3 | 4 |
PageRank | References | Authors |
1.95 | 0 | 2 |
Name | Order | Citations | PageRank |
|---|---|---|---|
| Damiano Brigo | 1 | 17 | 8.42 |
| Fabio Mercurio | 2 | 11 | 3.77 |