A ltering approach to pricing in multifactor term structure models
نویسندگان
چکیده
We present an approach for pricing of illiquid bonds (and bond derivatives) in an arbitrage-free way and consistently with observed prices of liquid bonds. The basic model is a multifactor term structure model with abstract latent factors. The approach is based on stochastic ltering techniques, leading to a continuous update of the distribution of the latent factors on the basis of the information coming from the observations. This allows our model to continuously "track" the real market.
منابع مشابه
A filtering approach to pricing in multifactor term structure models
We present an approach for pricing of illiquid bonds (and bond derivatives) in an arbitrage-free way and consistently with observed prices of liquid bonds. The basic model is a multifactor term structure model with abstract latent factors. The approach is based on stochastic filtering techniques, leading to a continuous update of the distribution of the latent factors on the basis of the inform...
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