Martínez, Francisco Venegas - In: Estudios Económicos 17 (2002) 2, pp. 171-192
In this paper, we develop a stochastic model to hedge the present value of cash flows against interest-rate risk with fixed-income products, in particular, with zero coupon bonds. In our approach, the dynamics of the interest rate is driven by a mean-reverting stochastic diffusion process. The...