A NEW FINITE ELEMENT METHOD FOR PRICING OF BOND OPTIONS UNDER TIME INHOMOGENEOUS AFFINE TERM STRUCTURE MODELS OF INTEREST RATES

In this paper we propose a new finite element method for pricing of bond options under time inhomogeneous one-factor affine models of short interest rates: the Hull–White model and the extended CIR model. The stability and weak convergence are established. Numerical results are presented to examine the method and to compare the calibrated models.

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Year of publication:	2007
Authors:	YANG, HONGTAO
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 10.2007, 01, p. 31-49
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	Inhomogeneous affine model \| calibration \| bond option \| finite element method

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004971788