Short rate analysis and marked point processes

Robert J. Elliott, Allanus H. Tsoi and Shiu Hong Lui

Mathematical Methods of Operations Research, 1999, vol. 50, issue 1, 149-160

Abstract: In this paper we model the instantaneous spot interest rate in a financial market by means of a marked point process with bounded, predictable intensity. The transformed intensity of the point process vanishes when the interest rate leaves a prescribed bounded interval. We show that the pure discount bond price satisfies a partial differential difference equation under the risk-adjusted measure P * . Finally, we perform some numerical simulations of the discount bond price. Copyright Springer-Verlag Berlin Heidelberg 1999

Keywords: Key words: Marked point process; spot interest rate; partial differential difference equation; discount bond price (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:spr:mathme:v:50:y:1999:i:1:p:149-160

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DOI: 10.1007/s001860050041

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