Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Yield Envelope: Price Ranges for Fixed Income Products

Contents:

Author Info

  • D. Epstein
  • P. Wilmott
Registered author(s):

    Abstract

    There is an extensive literature on the valuation of a fixed income contracts. The present work addresses the problem from a new outlook: we find upper and lower bounds for the value of a contract. Constraints are imposed on the evolution of a short-term interest rate and a liability is valued using its present value. A first-order non-linear hyperbolic partial differential equation is formulated for the value, V, of the contract. The numerical solution of this equation is then explored. To optimise its value, our contract is hedged with market traded zero-coupon bonds. We can then generate the 'Yield Envelope' (an alternative to the yield curve). At a maturity for which there are no traded instruments, a spread for the yield is obtained.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/1999mf10.pdf
    Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Maxine Collett)
    Download Restriction: no

    Bibliographic Info

    Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 1999mf10.

    as in new window
    Length:
    Date of creation: 1999
    Date of revision:
    Handle: RePEc:sbs:wpsefe:1999mf10

    Contact details of provider:
    Email:
    Web page: http://www.finance.ox.ac.uk
    More information through EDIRC

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:sbs:wpsefe:1999mf10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett).

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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