Modeling of short term interest rate based on tempered fractional Langevin equation

We develop a new class of continuous-time models based on the solutions of tempered fractional Langevin equations for Ornstein–Uhlenbeck process driven by Levy noise. We present methods of simulation of sample paths of such processes. We show how to use such models in modeling short term interest rate. We develop tempered Vasicek interest rate model by finding explicit solutions of tempered fractional Langevin equations.

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Year of publication:	2012
Authors:	Gajda, Janusz
Institutions:	Hugo Steinhaus Center for Stochastic Methods, Politechnika Wrocławska
Subject:	Short term interest rate \| Simulation \| Langevin equation \| Vasicek model

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Extent:	application/pdf
Series:	HSC Research Reports.
Type of publication:	Book / Working Paper
Notes:	Forthcoming in Acta Phys. Polon. B 43(5), 961-975. Number HSC/12/03 17 pages
Classification:	C15 - Statistical Simulation Methods; Monte Carlo Methods ; G12 - Asset Pricing ; E47 - Forecasting and Simulation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010626150