Interest Rate Models’ Implied Volatility Function Stochastic Movements

نویسنده

  • Thomas S. Y. Ho
چکیده

Abstract: This paper presents a one factor and a two factor arbitrage-free interest rate models with parsimonious implied volatility functions. The models are empirically tested on the entire swaption surface in three currencies (U. S. dollar, Euro and Japanese yen) over a five year period. They are shown to be robust in explaining the swaption values, and the implied volatility functions are shown to exhibit a three factor movement in all three currencies.

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تاریخ انتشار 2006