TY - JOUR
T1 - Asymptotics of bond yields and volatilities for extended Vasicek models under the real-world measure
AU - Fergusson, Kevin John
PY - 2017
Y1 - 2017
N2 - Vasicek's short rate model is a mean reverting model of the short rate which permits closed-form pricing formulae of zero coupon bonds and options on zero coupon bonds. This paper supplies proofs which are valid for any single factor mean reverting Gaussian short rate model having time-inhomogeneous parameters. The formulae are for the expected present value of payoffs under the real-world probability measure, known as actuarial pricing. Importantly, we give formulae for asymptotic levels of bond yields and volatilities for extended Vasicek models when suitable conditions are imposed on the model parameters.
AB - Vasicek's short rate model is a mean reverting model of the short rate which permits closed-form pricing formulae of zero coupon bonds and options on zero coupon bonds. This paper supplies proofs which are valid for any single factor mean reverting Gaussian short rate model having time-inhomogeneous parameters. The formulae are for the expected present value of payoffs under the real-world probability measure, known as actuarial pricing. Importantly, we give formulae for asymptotic levels of bond yields and volatilities for extended Vasicek models when suitable conditions are imposed on the model parameters.
UR - http://www.scopus.com/inward/record.url?scp=85067543192&partnerID=8YFLogxK
U2 - 10.1142/S2010495217500051
DO - 10.1142/S2010495217500051
M3 - Article
SN - 2010-4952
VL - 12
JO - Annals of Financial Economics
JF - Annals of Financial Economics
IS - 1
M1 - 1750005
ER -