ON THE FOUR-PARAMETER BOND PRICING MODEL

Bond Option Pricing under the CKLS Model

Consider the European call option written on a zero-coupon bond. Suppose the call option has maturity T and strike price K while the bond has maturity S>T. We propose a numerical method for evaluating the call option price under the Chan, Karolyi, Longstaff and Sanders (CKLS) model in which the increment of the short rate over a time interval of length dt, apart from being independent and stati...

A four-parameter model of glottal flow

A g l o t t a l flow model with four independent parameters is described: I t is r e f e r r e d t o as t h e LF-model. Three o f t h e s e p e r t a i n to the frequency, amplitude, and the exponential growth constant of a sinusoid. The fourth parameter is the time constant of an exponential recovery, i.e., r e t u r n phase, from t h e po in t of maximum c los ing d i s c o n t i n u i t y to...

Pricing Bond Yields in the European Bond Market

Pricing of a Defaultable Coupon Bond in an Extendedmerton’s Model

Three alternative approaches to the valuation of a defaultable coupon bond in an extended Merton’s model are given. Probabilistic approach yields a closed-form expression for the arbitrage price of this bond. A boundary value problem method is based on the concept of an CD-extended generator for Markov processes. The third approach relies on a recursive procedure method in which at every step a...

Estimation and Simulation of Bond Option Pricing on the Arbitrage Free Model with Jump

In pricing and hedging with financial derivatives, term structure models with jump are particularly important [1], since ignoring jumps in financial prices may cause inaccurate pricing and hedging rates [2]. Solutions of term structure model under jump-diffusion processes are justified because of movements in interest rates displaying both continuous and discontinuous behaviors [3]. Moreover, t...