Bonds and Options for One-Factor Interest Rate Models

Gunter H. Meyer

Chapter 6 in The Time-Discrete Method of Lines for Options and Bonds:A PDE Approach, 2015, pp 153-179 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Interest rate derivatives based on one-factor interest rate models can be priced with a diffusion equation which has much the same structure as the Black Scholes equation. For some interest rate models the corresponding diffusion equation has an analytic solution, for others one again has to rely on numerical approximations. This chapter explores the application of the method of lines/Riccati method for bonds and bond options based on one-factor interest rate models…

Keywords: Options; Bonds; PDE Formulation; Numerical Solution; Method of Lines; Stochastic Volatility; Jump Diffusion; Uncertain Parameters (search for similar items in EconPapers)
Date: 2015
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