Realdon, M. (2006) Quadratic term structure models in discrete time. Finance Research Letters, 3 (4). pp. 277-289. ISSN 1544-6123Full text not available from this repository.
This paper extends the results on quadratic term structure models in continuous time to the discrete time setting. The continuous time setting can be seen as a special case of the discrete time one. Discrete time quadratic models have advantages over their continuous time counterparts as well as over discrete time affine models. Recursive closed form solutions for zero coupon bonds are provided even in the presence of multiple correlated underlying factors, time-dependent parameters, regime changes and “jumps” in the underlying factors. In particular regime changes and “jumps” cannot so easily be accommodated in continuous time quadratic models. Pricing bond options requires simple integration and model estimation does not require a restrictive choice of the market price of risk.
|Academic Units:||The University of York > Economics and Related Studies (York)|
|Depositing User:||York RAE Import|
|Date Deposited:||24 Jul 2009 13:08|
|Last Modified:||24 Jul 2009 13:08|
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