Abstract
We derive a general form of the term structure of interest rates with jump. One-state models of Vasicek, CIR(Cox, Ingersol, and Ross), and the extended model of the Hull and White are introduced and the jump-diffusion models of the Ahn & Thompson and the Baz & Das as developed models are also investigated by using the Monte Carlo simulation which is one of the best methods in financial engineering to evaluate financial derivatives. We perform the Monte Carlo simulation with several scenarios even though it takes a long time to achieve highly precise estimates with the brute force method in terms of mean standard error which is one measure of the sharpness of the point estimates.
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© 2006 Springer-Verlag Berlin Heidelberg
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Park, K., Kim, M., Kim, S. (2006). Bond Pricing with Jumps and Monte Carlo Simulation. In: Alexandrov, V.N., van Albada, G.D., Sloot, P.M.A., Dongarra, J. (eds) Computational Science – ICCS 2006. ICCS 2006. Lecture Notes in Computer Science, vol 3991. Springer, Berlin, Heidelberg. https://doi.org/10.1007/11758501_9
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DOI: https://doi.org/10.1007/11758501_9
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-34379-0
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