The Cheyette Model Class

Ingo Beyna
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Ingo Beyna: Centre for Practical Quantitative Finance

Chapter Chapter 2 in Interest Rate Derivatives, 2013, pp 3-15 from Springer

Abstract: Abstract The HJM framework is well-established in academia and practise to price and hedge interest rate derivatives. Imposing a special time dependent structure on the forward rate volatility function leads directly to the class of Cheyette models. In contrast to the general HJM model, the dynamics are Markovian, which allows the application of standard econometric valuation concepts. Finally, we distinguish this approach from alternative settings discussed in literature.

Keywords: Stochastic Differential Equation; Forward Rate; Short Rate; Volatility Function; Interest Rate Derivative (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/978-3-642-34925-6_2

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