Pricing of discount bonds with a Markov switching regime

We consider a Markov switching regime and price a discount bond using a CIR-type short rate model. An explicit formula is obtained for the bond price which includes the solution of a matrix ODE. Our model is easy to calculate and captures the effect of regime uncertainty in the price and term structure. Copyright Springer-Verlag Berlin Heidelberg 2014

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Year of publication:	2014
Authors:	Elliott, Robert ; Nishide, Katsumasa
Published in:	Annals of Finance. - Springer. - Vol. 10.2014, 3, p. 509-522
Publisher:	Springer
Subject:	Bond pricing \| Term structure \| Markov switching regime \| CIR model \| Stochastic flows

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010959308