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Zero coupon bonds assesment using a stochastic model for the discount factor

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Usábel Rodrigo, Miguel Arturo (1998) Zero coupon bonds assesment using a stochastic model for the discount factor. [ Documentos de Trabajo de la Facultad de Ciencias Económicas y Empresariales; nº 03, 1998, ISSN: 2255-5471 ]

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Official URL: http://eprints.ucm.es/27085/




Abstract

In many empirical situations (e.g.:Libor), the rate of interest will remain fixed at a certain level (random instantaneous rate oi) for a random periodof time(ti) until a new random rate should be considered, oi+1, that will remain for ti+1, waiting time untill the next change in the rate of interest. Three models were developed using the approach cited aboye for random rate of interest and random waiting times between changes in the rate of interest. Using easy integral transforms (Laplace and Fourier) we will be able to calculate the moments of the probability function of the cliscount factor, V(t), and even its c.d.f.. The approach will also be extended to the calculation of the expected value and variance of a zero coupon bond with maturity t and we will also approximate the c.d.f.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Stochastic discount factor; Laplace and Fourier transforms; Renewal integral equations; Zero coupon bond.
Subjects:Sciences > Mathematics > Stochastic processes
Series Name:Documentos de Trabajo de la Facultad de Ciencias Económicas y Empresariales
Volume:1998
Number:03
ID Code:27085
Deposited On:14 Oct 2014 17:01
Last Modified:04 Sep 2015 10:23

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