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Pricing Callable Bonds Based on Monte Carlo Simulation Techniques

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DOI: 10.4236/ti.2012.32015    6,988 Downloads   12,807 Views   Citations

ABSTRACT

In this paper, a Monte Carlo method, which is based on some new simulation techniques proposed recently, is presented to numerically price the callable bond with several call dates and notice under the Cox-Ingersoll-Ross (CIR) interest rate model. The corresponding algorithms are also presented to practical callable bond pricing. The numerical experiments show that this method works very well for callable bond under the CIR interest rate model.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

D. Ding, Q. Fu and J. So, "Pricing Callable Bonds Based on Monte Carlo Simulation Techniques," Technology and Investment, Vol. 3 No. 2, 2012, pp. 121-125. doi: 10.4236/ti.2012.32015.

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