Abstract
Chapter 7 deals with the characterization of the various interest rate models and pricing of bonds. We start our discussion with the class of one-factor short rate models, and extend to multifactor models. The Heath–Jarrow–Morton (HJM) approach of modeling the stochastic movement of the forward rates is discussed. The HJM methodologies provide a uniform approach to modeling the instantaneous interest rates. We also present the formulation of the forward LIBOR (London-Inter-Bank-Offered-Rate) process under the Gaussian HJM framework.
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© 2008 Springer Berlin Heidelberg
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(2008). Interest Rate Models and Bond Pricing. In: Mathematical Models of Financial Derivatives. Springer Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-68688-0_7
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DOI: https://doi.org/10.1007/978-3-540-68688-0_7
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-42288-4
Online ISBN: 978-3-540-68688-0
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