Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations
This paper considers the effect on zero-coupon bond price valuation when short rate model has non-Gaussian dependent innovations. Higher order asymptotic theory enables us to obtain the approximate bond price formula. Some numerical examples are presented, where the process of innovations follows particular model. These examples indicate non-Gaussianity and dependency of innovations have a great influence on zero-coupon bond price.
Year of publication: |
2010
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Authors: | Honda, Tetsuhiro ; Tamaki, Kenichiro ; Shiohama, Takayuki |
Published in: |
Finance Research Letters. - Elsevier, ISSN 1544-6123. - Vol. 7.2010, 1, p. 60-69
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Publisher: |
Elsevier |
Keywords: | Edgeworth expansion Short rates Vasicek model Zero-coupon bond pricing |
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