IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Generalizations of Ho–Lee’s binomial interest rate model I: from one- to multi-factor

  • Jirô Akahori

    ()

  • Hiroki Aoki

    ()

  • Yoshihiko Nagata

    ()

In this paper a multi-factor generalization of Ho–Lee model is proposed. In sharp contrast to the classical Ho–Lee, this generalization allows for those movements other than parallel shifts, while it still is described by a recombining tree, and is a process with stationary independent increments to be compatible with principal component analysis. Based on the model, generalizations of duration-based hedging are proposed. A continuous-time limit of the model is also discussed. Copyright Springer Science+Business Media, LLC 2006

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://hdl.handle.net/10.1007/s10690-007-9039-8
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Asia-Pacific Financial Markets.

Volume (Year): 13 (2006)
Issue (Month): 2 (June)
Pages: 151-179

as
in new window

Handle: RePEc:kap:apfinm:v:13:y:2006:i:2:p:151-179
Contact details of provider: Web page: http://springerlink.metapress.com/link.asp?id=102851

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heath, David & Jarrow, Robert & Morton, Andrew, 1990. "Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(04), pages 419-440, December.
  2. Robert A. Jarrow, 2009. "The Term Structure of Interest Rates," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 69-96, November.
  3. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
  4. Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
  5. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
  6. Jirô Akahori, 2005. "A discrete Itô calculus approach to He’s framework for multi-factor discrete markets," Asia-Pacific Financial Markets, Springer, vol. 12(3), pages 273-287, September.
  7. Inui, Koji & Kijima, Masaaki, 1998. "A Markovian Framework in Multi-Factor Heath-Jarrow-Morton Models," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 423-440, September.
  8. Hull, John & White, Alan, 1990. "Pricing Interest-Rate-Derivative Securities," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 573-92.
  9. Li Chen & Damir Filipović & H. Vincent Poor, 2004. "Quadratic Term Structure Models For Risk-Free And Defaultable Rates," Mathematical Finance, Wiley Blackwell, vol. 14(4), pages 515-536.
  10. Peter Ritchken & L. Sankarasubramanian, 1995. "Volatility Structures Of Forward Rates And The Dynamics Of The Term Structure," Mathematical Finance, Wiley Blackwell, vol. 5(1), pages 55-72.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:kap:apfinm:v:13:y:2006:i:2:p:151-179. 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: (Sonal Shukla)

or (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.