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Pricing model for zero coupon bonds driven by Bessel-squared interest processes with a jump

Author

Listed:
  • Chou, Ching-Sung
  • Lin, Hsien-Jen

Abstract

This paper is concerned with finding the distribution of a squared Bessel process run for an exponentially distributed time and applying this result to find the price of a zero coupon bond at time zero when the pricing model involves a squared Bessel interest process and there is one jump.

Suggested Citation

  • Chou, Ching-Sung & Lin, Hsien-Jen, 2007. "Pricing model for zero coupon bonds driven by Bessel-squared interest processes with a jump," Statistics & Probability Letters, Elsevier, vol. 77(5), pages 475-482, March.
    • Handle: RePEc:eee:stapro:v:77:y:2007:i:5:p:475-482
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    References listed on IDEAS

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    1. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
    2. Hélyette Geman & Marc Yor, 1993. "Bessel Processes, Asian Options, And Perpetuities," Mathematical Finance, Wiley Blackwell, vol. 3(4), pages 349-375, October.
    3. Chou, Ching-Sung & Lin, Hsien-Jen, 2006. "Asian options with jumps," Statistics & Probability Letters, Elsevier, vol. 76(18), pages 1983-1993, December.
    4. de Haan, L. & Karandikar, R. L., 1989. "Embedding a stochastic difference equation into a continuous-time process," Stochastic Processes and their Applications, Elsevier, vol. 32(2), pages 225-235, August.
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    Cited by:

    1. Peng, Qidi & Schellhorn, Henry, 2018. "On the distribution of extended CIR model," Statistics & Probability Letters, Elsevier, vol. 142(C), pages 23-29.

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