An interest rate model with Markov chain volatility level

Radkov, Petar (2010): An interest rate model with Markov chain volatility level.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: interest rate model, bond price close form solution, Markov chain volatility level
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; G - Financial Economics > G0 - General > G00 - General

References

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