### 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 language | English |
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Title of host publication | Interest Rates: Term Structure Models, Monetary Policy, and Prediction |

Publisher | Nova Science Publishers, Inc. |

Pages | 19-61 |

Number of pages | 43 |

ISBN (Print) | 9781613247204 |

Publication status | Published - 2013 Jan |

### Fingerprint

### 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

*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.

Research output: Chapter in Book/Report/Conference proceeding › Chapter

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

}

TY - CHAP

T1 - Asymptotic expansion for interest rates with non-gaussian dependent innovations

AU - Shiohama, Takayuki

AU - Tamaki, Kenichiro

PY - 2013/1

Y1 - 2013/1

N2 - 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.

AB - 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.

KW - Bond option

KW - Edgeworth expansion

KW - Short rates

KW - Vasicek model

KW - Zero-coupon bond pricing

UR - http://www.scopus.com/inward/record.url?scp=84888832778&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84888832778&partnerID=8YFLogxK

M3 - Chapter

AN - SCOPUS:84888832778

SN - 9781613247204

SP - 19

EP - 61

BT - Interest Rates: Term Structure Models, Monetary Policy, and Prediction

PB - Nova Science Publishers, Inc.

ER -