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What If Two Different Interest Rates Datasets Allow for Describing the Same Financial Product?

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Valeria D’Amato

    (University of Salerno, Department of Economics and Statistics, Campus Universitario)

  • Antonio Díaz

    (Universidad de Castilla-La Mancha, Department of Economics and Finance)

  • Emilia Di Lorenzo

    (University of Naples Federico II, Department of Economic and Statistical Sciences, via Cintia)

  • Eliseo Navarro

    (Universidad de Alcalá, Departamento de Economía y Dirección de Empresa)

  • Marilena Sibillo

    (University of Salerno, Department of Economics and Statistics, Campus Universitario)

Abstract

The chance to choose among more than one dataset for representing and describing the movements in the financial market of the same financial entity has noteworthy effects on the practical quantifications. The case we consider in the paper concerns two datasets, different and deemed to be equivalent between them, referred to risk free interest rates. In light of the volatility term structure discrepancies between the two databases and of some closed formulas for stochastically describing the behavior of the financial valuation discrepancies by means of the Vasicek interest rate process, we show two relevant practical evidences. The application concerns the pricing of two derivative cases. The aim is to quantify how much the use of one dataset rather than the other impacts on the final result.

Suggested Citation

  • Valeria D’Amato & Antonio Díaz & Emilia Di Lorenzo & Eliseo Navarro & Marilena Sibillo, 2018. "What If Two Different Interest Rates Datasets Allow for Describing the Same Financial Product?," Springer Books, in: Marco Corazza & María Durbán & Aurea Grané & Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 289-293, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-89824-7_52
    DOI: 10.1007/978-3-319-89824-7_52
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