In this paper a simulation approach for defaultable yield curve is developed within the Heath et al. (1992) framework. The default event is modelled using the Cox process when the stochastic intensity repre sents the credit spread. The forward credit spread volatility function is affected by the...

Two types of financial instruments including (overnight) compounding are studied in this note. The first one is overnight compounded instruments in the case where the settlement is delayed with respect to the end of the compounding period (floating leg of the OIS). The second is options on the...

This paper examines the pricing of interest rate derivatives when the interest rate dynamics experience infrequent jump shocks modelled as a Poisson process and within the Markovian HJM framework developed in Chiarella & Nikitopoulos (2003). Closed form solutions for the price of a bond option...

We present an explicit formula for European options on coupon bearing bonds and swaptions in the Heath-Jarrow-Morton (HJM) one factor model with non-stochastic volatility. The formula extends the Jamshidian formula for zero-coupon bonds. We provide also an explicit way to compute the hedging...