A Simple Multi-Factor, Time-Dependent-Parameter Model for the Term Structure of Interest Rates

A Simple Multi-Factor, Time-Dependent-Parameter Model for the Term Structure of Interest Rates In this paper, we present a simple version of the Duffie and Kan model (1996). Our model can perfectly fit the yield curve and the volatility curve and further provide true closed form solutions to the pure discount bond price and its European contingent claims. Due to the specific factor structure in our model, the calibration exercise is easy to implement. This advantage will improve the computational efficiency in pricing American style claims. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

A Simple Multi-Factor, Time-Dependent-Parameter Model for the Term Structure of Interest Rates

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1015743507959
Publisher site
See Article on Publisher Site

References

  • A Universal Lattice
    Chen, R.; Yang, T.
  • A Yield-Factor Model of Interest Rates
    Duffie, D.; Kan, R.
  • A Multivariate Model of the Term Structure
    Langetieg, T.

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