An interest rate model with Markov chain volatility level

Petar Radkov

MPRA Paper from University Library of Munich, Germany

Abstract: We consider a two factor interest rate model, where the volatility level follows continuous time finite state Markov chain. We derive the close form solution of bond price that involves fundamental matrix.

Keywords: interest rate model; bond price close form solution; Markov chain volatility level (search for similar items in EconPapers)
JEL-codes: C68 G00 (search for similar items in EconPapers)
Date: 2010-06-19
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60179

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