A simple multi-factor, time-dependent-parameter model for the term structure of interest rates

Review of Quantitative Finance and Accounting

Volumn 19, Issue 1, 2002, Pages 5-20

  Chen, Ren Raw ^a   Yang, T L Tyler ^b  

^a RUTGERS UNIVERSITY   (United States)

^b FREDDIE MAC   (United States)

Author keywords

Factor model; Term structure of interest rates; Volatility curve; Yield curve

Indexed keywords

EID: 41149096260     PISSN: 0924865X     EISSN: 15737179     Source Type: Journal    
DOI: 10.1023/A:1015743507959     Document Type: Article

References (34)

1. Amin, K., "Option Pricing Trees." Journal of Derivatives, 34-46, (1995).
2. Arnold, L., Stochastic Differential Equations: Theory and Applications, John Wiley and Sons, 1974.
3. Black, F., E. Derman and W. Toy, "A One-Factor Model of Interest Rates and Its Application to Treasury Bond Options." Financial Analyst Journal, January-February, 33-39, (1990).
4. Black, F. and P. Karasinski, "Bond and Option Pricing When Short Rates Are Lognormal." Financial Analysts Journal, July-August, 47, 52-59, (1991).
5. Black, F. and M. Scholes, "The Pricing of Options and Corporate Liabilities." Journal of Political Economy, 637-654, (1973).
6. Boyle, P., "The Quality Option and Timing Option in Futures Contracts." Journal of Finance 44(1), (1989).
7. Brennan, M. and E. Schwartz, "A Continuous Time Approach to the Pricing of Bonds." Journal of Banking and Finance, 133-155, (1978).
8. Brennan, M. and E. Schwartz, "An Equilibrium Model of Bond Pricing and a Test of Market Efficiency." Journal of Financial and Quantitative Analysis, September, (1982).
9. Campbell, J., "A Defense of Traditional Hypothesis about the Term Structure of Interest Rates." Journal of Finance 41, March, 183-194, (1986).
10. Chaplin, G., A Formula for Bond Option Values under an Ornstein-uhlenbeck Model for the Spot. Working paper, University of Waterloo, 1987.
11. Chen, R., "Exact Solutions for Futures and European Futures Options on Pure Discount Bonds." Journal of Financial and Quantitative Analysis 27(1), 97-107, (1992).
12. Chen, R. and L. Scott, "Pricing Interest Rate Options in a Two-Factor Cox-Ingersoll-Ross Model of the Term Structure." Review of Financial Studies 5(4), 613-636, (1992).
13. Chen, R. and L. Scott, "Maximum Likelihood Estimation of a Multi-Factor Equilibrium Model of the Term Structure of Interest Rates." Journal of Fixed Income 3(3), 14-32, (1993).
14. Chen, R. and L. Scott, Multi-Factor Cox-Ingersoll-Ross Models of the Term Structure of Interest Rates: Estimates and Tests Using a Kalman Filter. Working paper, Rutgers University and University of Georgia, 1995.
15. Chen, R. and T. Yang, "A Universal Lattice." Review of Derivatives Research 3(2), 115-134, (1999).
16. Cox, J., J. Ingersoll and S. Ross, "An Intertemporal General Equilibrium Model of Asset Prices." Econometrica 53(2), 363-384, (1985a).
17. Cox, J., J. Ingersoll and S. Ross, "A Theory of the Term Structure of Interest Rates." Econometrica 53(2), 385-407, (1985b).
18. Dai, Q. and K. Singleton, "Specification Analysis of Affine Term Structure Models." Journal of Finance 55, 1943-1978, (2000).
19. Duffie, D. and R. Kan, "A Yield-Factor Model of Interest Rates." Mathematical Finance 6, 379-406, (1996).
20. Duffie, D., J. Pan and K. Singleton, "Transform Analysis and Asset Pricing for Affine Jump Diffusions." Econometrica 68, 1343-1376, (2000).
21. Dybvig, P., Bond and Bond Option Pricing Based on the Current Term Structure. Working paper, Washington University, February, 1989.
22. Filipovic, D., "A General Characterization of One Factor Affine Term Structure Models." Finance and Stochastics 5, 389-412, (2001).
23. Heath, D., R. Jarrow and A. Morton, "Bond Pricing and the Term Structure of Interest Rates : A New Methodology." Econometrica, February, (1992).
24. Heidari, M. and Y. Wu, "Are Interest Rates Derivatives Spanned by the Term Structure of Interest Rates?" Working paper, Fordham University, 2001.
25. Ho, T. and S. Lee, "Term Structure Movements and Pricing Interest Rate Contingent Claims." Journal of Finance, December, (1986).
26. Hull, J. and A. White, "Pricing Interest Rate Derivative Securities." Review of Financial Studies 3(4), 573-592, (1990a).
27. Hull, J. and A. White, "Valuing Derivative Securities Using the Explicit Finite Difference Method." Journal of Financial and Quantitative Analysis, 25(1), 87-100, (1990b).
28. Hull, J. and A. White, "One Factor Interest Rate Models and the Valuation of Interest Rate Derivative Securities." Journal of Financial and Quantitative Analysis, (1993).
29. Langetieg, T., "A Multivariate Model of the Term Structure." Journal of Finance 15(1), 71-97, (1980).
30. Leippold, M. and Y. Wu, Design and Estimation of Quadratic Term Structure Models. Working paper, Fordham University, 2000.
31. Leippold, M. and Y. Wu, "Asset Pricing under the Quadratic Class." Journal of Financial and Quantitative Analysis, forthcoming, (2002).
32. Litterman, R. and J. Scheinkman, "Common Factors Affecting Bond Returns." Journal of Fixed Income Securities 1(1), 54-61, (1991).
33. Singleton, K. and L. Umantsev, Pricing Coupon-Bond Options and Swaptions in Affine Term Structure Models. Working paper, Stanford University, 2001.
34. Vasicek, O., "An Equilibrium Characterization of the Term Structure." Journal of Financial Economics, 177-188, (1977).