A multi-quality model of interest rates
We consider a consistent pricing model of government bonds, interest-rate swaps and basis swaps in one currency within the no-arbitrage framework. To this end, we propose a three yield-curve model, one for discounting cash flows, one for calculating LIBOR deposit rates and one for calculating coupon rates of government bonds. The derivation of the yield curves from observed data is presented, and the option prices on a swap or a government bond are studied. A one-factor quadratic Gaussian model is proposed as a specific model, and is shown to provide a very good fit to the current Japanese low-interest-rate environment.
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.
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.
Volume (Year): 9 (2009)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RQUF20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RQUF20|
When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:9:y:2009:i:2:p:133-145. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.