On pricing of interest rate derivatives

T. Di Matteo, M. Airoldi and Enrico Scalas

Physica A: Statistical Mechanics and its Applications, 2004, vol. 339, issue 1, 189-196

Abstract: At present, there is an explosion of practical interest in the pricing of interest rate (IR) derivatives. Textbook pricing methods do not take into account the leptokurticity of the underlying IR process. In this paper, such a leptokurtic behavior is illustrated using London interbank offered rate data, and a possible martingale pricing scheme is discussed.

Keywords: Interest rate; Derivative pricing; Econophysics (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:339:y:2004:i:1:p:189-196

DOI: 10.1016/j.physa.2004.03.042

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