IDEAS home Printed from
   My bibliography  Save this article

Bayesian binomial zero-coupon bonds model


  • Bogomolov, Rostislav

    () (Central Economics and Mathematics Institute, Moscow, Russian Federation)

  • Khametov, Vladimir

    () (National Research University Higher School of Economics, Moscow, Russian Federation)


The article is devoted to construction of stochastic one-factor evolutional model for zero-coupon bond in discrete time. As the base sequence it was used an asymmetric geometric random walk. It is shown that in case of observing not only the previous values of wandering, but his condition the last time it is Markov. In this case derived formulas for the transition probability in one step, as well as for the conditional mean and variance. Based on these facts, the article describes a stochastic model of zero-coupon bonds. For this model of bond were also find explicit formulas of its volatility, risk-neutral price, temporal structure of interest rates. Results of simulation display good match with real data.

Suggested Citation

  • Bogomolov, Rostislav & Khametov, Vladimir, 2016. "Bayesian binomial zero-coupon bonds model," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 42, pages 100-120.
  • Handle: RePEc:ris:apltrx:0293

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305 World Scientific Publishing Co. Pte. Ltd..
    2. Ho, Thomas S Y & Lee, Sang-bin, 1986. " Term Structure Movements and Pricing Interest Rate Contingent Claims," Journal of Finance, American Finance Association, vol. 41(5), pages 1011-1029, December.
    Full references (including those not matched with items on IDEAS)

    More about this item


    zero-coupon bond model; geometric random walk; interest rate; yield; model calibration;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General


    Access and download statistics


    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:ris:apltrx:0293. 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: (Anatoly Peresetsky). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.