Stochastic interest rates model in compounding
نویسندگان
چکیده
منابع مشابه
A Model of Optimal Capital Structure with Stochastic Interest Rates
Matt Spiegel for their comments and suggestions. Abstract This paper develops a model of optimal capital structure with stochastic interest rate which is assumed to follow a mean-reverting process. Closed-form solutions are obtained for both the value of the firm and the value of its risky debt. The paper finds that the current level and the long-run mean of the interest rate process play disti...
متن کاملOn the Heston Model with Stochastic Interest Rates
We discuss the Heston [Heston-1993] model with stochastic interest rates driven by Hull-White [Hull,White-1996] (HW) or Cox-Ingersoll-Ross [Cox, et al.-1985] (CIR) processes. Two projection techniques to derive affine approximations of the original hybrid models are presented. In these approximations we can prescibe a non-zero correlation structure between all underlying processes. The affine a...
متن کاملInvestment hysteresis under stochastic interest rates
Most decision making research in real options focuses on revenue uncertainty assuming discount rates remain constant. However for many decisions, revenue or cost streams are relatively static and investment is driven by interest rate uncertainty, for example the decision to invest in durable machinery and equipment. Using interest rate models from Cox et al. (1985b), we generalize the work of I...
متن کاملAn Affine Multicurrency Model with Stochastic Volatility and Stochastic Interest Rates
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be efficiently performed through the FFT methodology thanks to the affine property of the model. Our framework is also able to describe many non trivi...
متن کاملStochastic Compounding and Uncertain Valuation∗
Exploring long-term implications of valuation leads us to recover and use a distorted probability measure that reflects the long-term implications for risk pricing. This measure is typically distinct from the physical and the risk neutral measures that are well known in mathematical finance. We apply a generalized version of Perron-Frobenius theory to construct this probability measure and pres...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Science World Journal
سال: 2010
ISSN: 1597-6343
DOI: 10.4314/swj.v4i1.51835