Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations

Tetsuhiro Honda, Kenichiro Tamaki, Takayuki Shiohama

    Research output: Contribution to journal › Article

    4 Citations (Scopus)

    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 languageEnglish
    Pages (from-to)60-69
    Number of pages10
    JournalFinance Research Letters
    Volume7
    Issue number1
    DOIs
    Publication statusPublished - 2010 Mar

    Fingerprint

    Interest rates
    Innovation
    Bond prices
    Zero-coupon bond
    Asymptotic theory
    Short-rate model

    Keywords

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

    ASJC Scopus subject areas

    • Finance

    Cite this

    Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations. / Honda, Tetsuhiro; Tamaki, Kenichiro; Shiohama, Takayuki.

    In: Finance Research Letters, Vol. 7, No. 1, 03.2010, p. 60-69.

    Research output: Contribution to journal › Article

    Honda, T, Tamaki, K & Shiohama, T 2010, 'Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations', Finance Research Letters, vol. 7, no. 1, pp. 60-69. https://doi.org/10.1016/j.frl.2009.12.001
    Honda T, Tamaki K, Shiohama T. Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations. Finance Research Letters. 2010 Mar;7(1):60-69. https://doi.org/10.1016/j.frl.2009.12.001
    Honda, Tetsuhiro ; Tamaki, Kenichiro ; Shiohama, Takayuki. / Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations. In: Finance Research Letters. 2010 ; Vol. 7, No. 1. pp. 60-69.
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