A simple class of square-root interest-rate models

Farshid Jamshidian

Applied Mathematical Finance, 1995, vol. 2, issue 1, 61-72

Abstract: An analytically tractable class of square-root interest-rate models is introduced. Algebraic expressions are found for the drift and volatility parameters of the short rate in terms of initial yield and volatility curves. Explicit formulae are derived for bond, Arrow-Debreu, and European and American bond options.

Keywords: square-root process; chi-squared distribution; Riccati equation; yield curve; volatility curve; bond option (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (15)

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DOI: 10.1080/13504869500000004

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