IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v06y2003i04ns0219024903001852.html
   My bibliography  Save this article

A Complete Yield Curve Description Of A Markov Interest Rate Model

Author

Listed:
  • ROBERT J. ELLIOTT

    (Haskayne School of Business, University of Calgary, Calgary, Alberta, Canada, T2N 1N4, Canada)

  • ROGEMAR S. MAMON

    (Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, Ontario, Canada, N2L 3G1, Canada)

Abstract

This paper aims to present a complete term structure characterisation of a Markov interest rate model. To attain this objective, we first give a proof that establishes the Unbiased Expectation Hypothesis (UEH) via the forward measure. The UEH result is then employed, which considerably facilitates the calculation of an explicit analytic expression for the forward ratef(t, T). The specification of the bond priceP(t, T), yield rateY(t, T)andf(t, T)gives a complete set of yield curve descriptions for an interest rate market where the short rateris a function of a continuous time Markov chain.

Suggested Citation

  • Robert J. Elliott & Rogemar S. Mamon, 2003. "A Complete Yield Curve Description Of A Markov Interest Rate Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 317-326.
    • Handle: RePEc:wsi:ijtafx:v:06:y:2003:i:04:n:s0219024903001852
    DOI: 10.1142/S0219024903001852
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024903001852
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024903001852?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Çanakoglu, Ethem & Özekici, Süleyman, 2010. "Portfolio selection in stochastic markets with HARA utility functions," European Journal of Operational Research, Elsevier, vol. 201(2), pages 520-536, March.
    2. Gao, Huan & Mamon, Rogemar & Liu, Xiaoming & Tenyakov, Anton, 2015. "Mortality modelling with regime-switching for the valuation of a guaranteed annuity option," Insurance: Mathematics and Economics, Elsevier, vol. 63(C), pages 108-120.
    3. Ethem Çanakoğlu & Süleyman Özekici, 2009. "Portfolio selection in stochastic markets with exponential utility functions," Annals of Operations Research, Springer, vol. 166(1), pages 281-297, February.
    4. Celikyurt, U. & Ozekici, S., 2007. "Multiperiod portfolio optimization models in stochastic markets using the mean-variance approach," European Journal of Operational Research, Elsevier, vol. 179(1), pages 186-202, May.
    5. Robert J. Elliott & Tak Kuen Siu, 2016. "Pricing regime-switching risk in an HJM interest rate environment," Quantitative Finance, Taylor & Francis Journals, vol. 16(12), pages 1791-1800, December.
    6. U. Çakmak & S. Özekici, 2006. "Portfolio optimization in stochastic markets," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 63(1), pages 151-168, February.
    7. Rüdiger Frey & Thorsten Schmidt, 2012. "Pricing and hedging of credit derivatives via the innovations approach to nonlinear filtering," Finance and Stochastics, Springer, vol. 16(1), pages 105-133, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:06:y:2003:i:04:n:s0219024903001852. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.