Continuous time Ehrenfest process in term structure modelling

Alexander Kaplun

Papers from arXiv.org

Abstract: In this paper, a finite-state mean-reverting model for the short-rate, based on the continuous time Ehrenfest process, will be examined. Two explicit pricing formulae for zero-coupon bonds will be derived in the general and the special symmetric cases. Its limiting relationship to the Vasicek model will be examined with some numerical results.

Date: 2010-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1003.6042

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