Implied interest rate pricing models
AbstractWe show how market prices for standard interest rate products can be used, under the assumption of a one-factor model, to imply the joint distribution of zero coupon bonds of differing maturities at a fixed date $T$ in the future. We relate these results to the solution of an optimisation problem arising in the pricing of amortising swaptions. Finally, we apply these ideas to price (and hedge) products of importance in the interest rate derivatives market.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 2 (1998)
Issue (Month): 3 ()
Note: received: March 1997; final version received: May 1997
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Web page: http://www.springerlink.com/content/101164/
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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- Marek Rutkowski, 1999. "Models of forward Libor and swap rates," Applied Mathematical Finance, Taylor & Francis Journals, vol. 6(1), pages 29-60.
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