An interest-rate model with jumps for uncertain financial markets

Suisheng Yu and Yufu Ning

Physica A: Statistical Mechanics and its Applications, 2019, vol. 527, issue C

Abstract: The interest rate in the ideal market involving human uncertainty is usually described by uncertain differential equations. Considering the fluctuations and sudden shocks in the market, this paper proposes an interest rate model by means of uncertain differential equations with jumps. A formula to calculate the price of a zero-coupon bond is derived for the interest rate model, which is of a very complex form. To calculate the price numerically, an algorithm is designed, and the effectiveness and the efficiency of the algorithm are illustrated via some numerical experiments.

Keywords: Uncertain differential equation with jumps; Uncertainty theory; Zero-coupon bond; Uncertain finance (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:527:y:2019:i:c:s0378437119308283

DOI: 10.1016/j.physa.2019.121424

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