کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
5098889 1376967 2012 21 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Evaluating callable and putable bonds: An eigenfunction expansion approach
موضوعات مرتبط
مهندسی و علوم پایه ریاضیات کنترل و بهینه سازی
پیش نمایش صفحه اول مقاله
Evaluating callable and putable bonds: An eigenfunction expansion approach
چکیده انگلیسی

We propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on the eigenfunction expansion of the pricing operator. Given the set of call and put dates, the callable and putable bond pricing function is the value function of a stochastic game with stopping times. Under some technical conditions, it is shown to have an eigenfunction expansion in eigenfunctions of the pricing operator with the expansion coefficients determined through a backward recursion. For popular short rate diffusion models, such as CIR, Vasicek, 3/2, the method is orders of magnitude faster than the alternative approaches in the literature. In contrast to the alternative approaches in the literature that have so far been limited to diffusions, the method is equally applicable to short rate jump-diffusion and pure jump models constructed from diffusion models by Bochner's subordination with a Lévy subordinator.

ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Journal of Economic Dynamics and Control - Volume 36, Issue 12, December 2012, Pages 1888-1908
نویسندگان
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