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Researches On Term Structure Models Of Interest Rates

Posted on:2004-02-28Degree:MasterType:Thesis
Country:ChinaCandidate:J J ZhouFull Text:PDF
GTID:2156360122470524Subject:Technical Economics and Management
Abstract/Summary:PDF Full Text Request
The term structure models of interest rates measure the relationship among the yields on default-free securities that differ only in their term to maturity, and they are widely used in pricing and managing interest rate derivatives and fixed-income securities. Many derivative securities' pricing and design largely depend on these models, many financial theory and applied researches are related to them, so term structure models became a very important issue and many researcher developed many models to describe term structure behavior.In this article we first review the theoretical development of the dynamic models of interest rate term structure. From the classic equilibrium framework, analyzed the one-factor models and multi-factor models; Under the no-arbitrage theory, We introduced such models as Ho-Lee and HJM. We almost analyzed all kinds models' advantages and disadvantages and their relationships, then commented on the new progresses of these models.On the basis of analyse and synthesize a variety of models, under no arbitrage framework we apply the instantaneous forward rates driving by random field and adopt the methods of the definition of state variables, and establish a markovian random field model of riskless rate including two state variables under risk-neutral distribution. Our models are infinite-dimensional and could match the current term structure automatically. We Briefly outline some volatility function term structure models, and in special cases we get two important models.At last we show how to put our special elasticity volatility models into practice through a simple numerical example. Under adopting the idea of Monte-Carlo simulation and applying two kinds of fixed elasticity state variables random field models, we write a program of bond options pricing. We get the distribution of the interest rate under the risk-neutral measure and the evolving curves of the two state variables and characters according to models.
Keywords/Search Tags:Term Structure, Finance, Securities, Economic Mathematics Models, Monte-Carlo Simulation
PDF Full Text Request
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