Abstract
This paper considers the effect on zero-coupon bond price valuation when short rate model has non-Gaussian dependent innovations. Higher order asymptotic theory enables us to obtain the approximate bond price formula. Some numerical examples are presented, where the process of innovations follows particular model. These examples indicate non-Gaussianity and dependency of innovations have a great influence on zero-coupon bond price.
Original language | English |
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Pages (from-to) | 60-69 |
Number of pages | 10 |
Journal | Finance Research Letters |
Volume | 7 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2010 Mar |
Keywords
- Edgeworth expansion
- Short rates
- Vasicek model
- Zero-coupon bond pricing
ASJC Scopus subject areas
- Finance