Higher order asymptotic bond price valuation for interest rates with non-Gaussian dependent innovations

Tetsuhiro Honda, Kenichiro Tamaki and Takayuki Shiohama

Finance Research Letters, 2010, vol. 7, issue 1, 60-69

Abstract: This paper considers the effect on zero-coupon bond price valuation when short rate model has non-Gaussian dependent innovations. Higher order asymptotic theory enables us to obtain the approximate bond price formula. Some numerical examples are presented, where the process of innovations follows particular model. These examples indicate non-Gaussianity and dependency of innovations have a great influence on zero-coupon bond price.

Keywords: Edgeworth; expansion; Short; rates; Vasicek; model; Zero-coupon; bond; pricing (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:7:y:2010:i:1:p:60-69

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