Price Callable Bonds

C ONTENTS I II Introduction Interest locate Models II-A Single-factor sits . . . . . . . . . . . . . . . . . . . . . . . . . II-A1 II-A2 II-A3 II-A4 II-A5 II-A6 II-A7 III Options III-A Value the plectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . III-A1 III-A2 IV Black-Scholes equation . . . . . . . . . . . . . . . . . European options . . . . . . . . . . . . . . . . . . . . The Merton amaze (1973) . . . . . . . . . . . . . . . . The Vasicek position (1977) . . . . . . . . . . . . . . . The Brennan and Schwartz model (1980) . . . . . . . iv vi vi vii vii vii The Marsh Rosenfeld model (1983) . . . . . . . . . . eighter from Decatur The Cox, Ingersoll and Ross (CIR) model (1985) . . . viii The Hull-White model (1993) . . . . . . . . . . . . . The Lognormal model (1987) . . . . . . . . . . . . . . ix ix x x x xii xiii bounded Difference Methods IV-A IV-B base knowledge of numerical differentiation . . . . . . . . . . . 14 Types of ?nite deflexion methods . . . . . . . . . . . . . . . . . 16 xvii V determine callable Bonds V-A price zero-coupon bonds with the CIR model . . . . . . . . . . xvii V-A1 V-A2 Pricing zero-coupon bonds . . . . . . . . . . . . . . . xvii Pricing bonds with European travel to options . . . . . . . xx V-B Pricing zero-coupon bonds with Vasicek model . . . . . . . . . . twenty-three V-B1 V-B2 Vasicek model . . .

. . . . . . . . . . . . . . . . . . . xxiii Pricing bonds with European call options . . . . . . . xxvi ii VI Conclusion xxix Appendix A: Matlab programme for pricing the zero-coupon bond without option (Fig. 1) Appendix B: Matlab programme for pr! icing the zero-coupon bond found on the Vasicek model (Fig. 5) References xxxi xxxiv xxx iii Abstract In this root word, we value callable bonds. The interest rate transition considered follows the Vasicek or the Cox-Ingersoll-Ross (CIR) models. Our analytical results are reached using the implicit Euler ?nite difference method. This paper is organized as follows: Section I...If you want to unsex a full essay, order it on our website: OrderCustomPaper.com

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