On Markov-modulated Exponential-affine Bond Price Formulae

Robert Elliott and Tak Kuen Siu

Applied Mathematical Finance, 2009, vol. 16, issue 1, 1-15

Abstract: We consider the bond valuation problem when the short rate process is described by a Markovian regime-switching Hull-White model or a Markovian regime-switching Cox-Ingersoll-Ross model. In each of the two short rate models, we establish a Markov-modulated exponential-affine bond price formula with coefficients given in terms of fundamental matrix solutions of linear matrix differential equations.

Keywords: Exponential affine form; bond valuation; regime-switching forward measure; fundamental matrix solution (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (27)

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DOI: 10.1080/13504860802015744

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