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Implied bond and derivative prices based on non-linear stochastic interest rate models. (English) Zbl 1202.91327

Summary: In this paper we expand the Box Method of Sorwar et al. (2007) to value both default free bonds and interest rate contingent claims based on one factor non-linear interest rate models. Further we propose a one-factor non-linear interest rate model that incorporates features suggested by recent research. An example shows the extended Box Method works well in practice.

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
91G30 Interest rates, asset pricing, etc. (stochastic models)
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