A Theory for the Term Structure of Interest Rates
The Convolution and Master equations governing the time behavior of the term structure of Interest Rates are set up both for continuous variables and for their discretised forms. The notion of Seed is introduced. The discretised theoretical distributions matching the empirical data from the Federal Reserve System (FRS) are deduced from a discretised seed which enjoys remarkable scaling laws. In particular the tails of the distributions are very well reproduced. These results may be used to develop new methods for the computation of the value-at-risk and fixed-income derivative pricing.
|Date of creation:||24 May 2004|
|Date of revision:|
|Note:||Type of Document - zip; pages: 33. A latex version can be obtained on http://babbage.sissa.it/cond-mat/0405293|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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