A Nonlinear Non-probabilistic Spot Interest Rate Model
We show how to use 'uncertainty' in place of the more traditional Brownian 'randomness' to model a short-term interest rate. The advantage of this model is principally that it is difficult to show statistically that it is wrong. Whether the model is useful for pricing fixed-income products is less clear. We discuss the pros and cons of the model, showing how to price and hedge various contracts, saying which are easy and which are hard.
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.finance.ox.ac.ukEmail: |
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:sbs:wpsefe:1999mf21. 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: (Maxine Collett)
If references are entirely missing, you can add them using this form.