Computation of Japanese bonds and derivative securities

In this paper, we use the Box numerical method to compute implied bond and option prices starting from the general CKLS interest rate model based on Japanese interbank data. In particular, we compute numerically implied prices from the CKLS, Vasicek, Cox–Ingersoll–Ross and Brennan–Schwartz models. We also compare the prices with those obtained from the exact analytical formulae of the Cox–Ingersoll–Ross model. We find that the implied bond and option prices vary across models for Japan.