Generalizations of Ho–Lee’s binomial interest rate model I: from one- to multi-factor

Jiro Akahori, Hiroki Aoki () and Yoshihiko Nagata ()

Asia-Pacific Financial Markets, 2006, vol. 13, issue 2, 179 pages

Abstract: In this paper a multi-factor generalization of Ho–Lee model is proposed. In sharp contrast to the classical Ho–Lee, this generalization allows for those movements other than parallel shifts, while it still is described by a recombining tree, and is a process with stationary independent increments to be compatible with principal component analysis. Based on the model, generalizations of duration-based hedging are proposed. A continuous-time limit of the model is also discussed. Copyright Springer Science+Business Media, LLC 2006

Keywords: Ho–Lee model; Duration; Multi-factor; Recombining tree; Stationary increments; Forward rate; Drift condition; 91B28; 60G50; G12 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10690-007-9039-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Generalizations of Ho-Lee's binomial interest rate model I: from one- to multi-factor (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:apfinm:v:13:y:2006:i:2:p:151-179

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10690/PS2

DOI: 10.1007/s10690-007-9039-8

Access Statistics for this article

Asia-Pacific Financial Markets is currently edited by Jiro Akahori

More articles in Asia-Pacific Financial Markets from Springer, Japanese Association of Financial Economics and Engineering
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().