Asymptotic expansion for interest rates with non-gaussian dependent innovations

Takayuki Shiohama, Kenichiro Tamaki

    Research output: Chapter in Book/Report/Conference proceedingChapter

    1 Citation (Scopus)

    Abstract

    We consider the effect on zero-coupon bond price and option valuation when a short rate model has non-Gaussian dependent innovations. Higher-order asymptotic theory enables approximate bond price formula and zero-coupon bond option price formula to be obtained. Some numerical examples are presented, where the process of innovation follows a particular model. These examples indicate that non-Gaussianity and dependence of innovations have a great influence on both zero-coupon bond price and option valuation.

    Original languageEnglish
    Title of host publicationInterest Rates: Term Structure Models, Monetary Policy, and Prediction
    PublisherNova Science Publishers, Inc.
    Pages19-61
    Number of pages43
    ISBN (Print)9781613247204
    Publication statusPublished - 2013 Jan

    Fingerprint

    interest rate
    innovation
    Interest rates
    Innovation
    Zero-coupon bond
    Bond options
    Bond prices
    Asymptotic expansion
    Option valuation

    Keywords

    • Bond option
    • Edgeworth expansion
    • Short rates
    • Vasicek model
    • Zero-coupon bond pricing

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)
    • Social Sciences(all)

    Cite this

    Shiohama, T., & Tamaki, K. (2013). Asymptotic expansion for interest rates with non-gaussian dependent innovations. In Interest Rates: Term Structure Models, Monetary Policy, and Prediction (pp. 19-61). Nova Science Publishers, Inc..

    Asymptotic expansion for interest rates with non-gaussian dependent innovations. / Shiohama, Takayuki; Tamaki, Kenichiro.

    Interest Rates: Term Structure Models, Monetary Policy, and Prediction. Nova Science Publishers, Inc., 2013. p. 19-61.

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Shiohama, T & Tamaki, K 2013, Asymptotic expansion for interest rates with non-gaussian dependent innovations. in Interest Rates: Term Structure Models, Monetary Policy, and Prediction. Nova Science Publishers, Inc., pp. 19-61.
    Shiohama T, Tamaki K. Asymptotic expansion for interest rates with non-gaussian dependent innovations. In Interest Rates: Term Structure Models, Monetary Policy, and Prediction. Nova Science Publishers, Inc. 2013. p. 19-61
    Shiohama, Takayuki ; Tamaki, Kenichiro. / Asymptotic expansion for interest rates with non-gaussian dependent innovations. Interest Rates: Term Structure Models, Monetary Policy, and Prediction. Nova Science Publishers, Inc., 2013. pp. 19-61
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