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Implied Bond and Derivative Prices Based on Non-Linear Stochastic Interest Rate Models

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DOI: 10.4236/am.2010.11006    4,785 Downloads   8,646 Views  

ABSTRACT

In this paper we expand the Box Method of Sorwar et al. (2007) to value both default free bonds and interest rate contingent claims based on one factor non-linear interest rate models. Further we propose a one-factor non-linear interest rate model that incorporates features suggested by recent research. An example shows the extended Box Method works well in practice.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

G. Sorwar and S. Mozumder, "Implied Bond and Derivative Prices Based on Non-Linear Stochastic Interest Rate Models," Applied Mathematics, Vol. 1 No. 1, 2010, pp. 37-43. doi: 10.4236/am.2010.11006.

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