UM
Bond and option pricing for interest rate model with clustering effects
Zhang, Xin; Xiong, Jie; Shen, Yang
2018
Source PublicationQUANTITATIVE FINANCE
ABS Journal Level3
ISSN1469-7688
Volume18Issue:6Pages:969-981
AbstractThis paper analyzes an interest rate model with self-exciting jumps, in which a jump in the interest rate model increases the intensity of jumps in the same model. This self-exciting property leads to clustering effects in the interest rate model. We obtain a closed-form expression for the conditional moment-generating function when the model coefficients have affine structures. Based on the Girsanov-type measure transformation for general jump-diffusion processes, we derive the evolution of the interest rate under the equivalent martingale measure and an explicit expression of the zero-coupon bond pricing formula. Furthermore, we give a pricing formula for the European call option written on zero-coupon bonds. Finally, we provide an interpretation for the clustering effects in the interest rate model within a simple framework of general equilibrium. Indeed, we construct an interest rate model, the equilibrium state of which coincides with the interest rate model with clustering effects proposed in this paper.
KeywordInterest rate modelling Marked point process Hawkes processes Bond pricing Bond option
DOI10.1080/14697688.2017.1388534
URLView the original
Indexed BySCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics ; Mathematics ; Mathematical Methods In Social Sciences
WOS SubjectBusiness, Finance ; Economics ; Mathematics, Interdisciplinary Applications ; Social Sciences, Mathematical Methods
WOS IDWOS:000436234700007
PublisherROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
The Source to ArticleWOS
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Cited Times [WOS]:3   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionUniversity of Macau
Recommended Citation
GB/T 7714
Zhang, Xin,Xiong, Jie,Shen, Yang. Bond and option pricing for interest rate model with clustering effects[J]. QUANTITATIVE FINANCE,2018,18(6):969-981.
APA Zhang, Xin,Xiong, Jie,&Shen, Yang.(2018).Bond and option pricing for interest rate model with clustering effects.QUANTITATIVE FINANCE,18(6),969-981.
MLA Zhang, Xin,et al."Bond and option pricing for interest rate model with clustering effects".QUANTITATIVE FINANCE 18.6(2018):969-981.
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