Price Callable Bonds

C ONTENTS I II Introduction Interest position 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 stupefy (1977) . . . . . . . . . . . . . . . The Brennan and Schwartz model (1980) . . . . . . . iv vi vi vii vii vii The Marsh Rosenfeld model (1983) . . . . . . . . . . cardinal 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 finite Difference Methods IV-A IV-B base knowledge of numerical differentiation . . . . . . . . . . . fourteen Types of ?nite variance methods . . . . . . . . . . . . . . . . . 16 xvii V determine callable Bonds V-A set 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 . . . . . . . . . . xxiii V-B1 V-B2 Vasicek model . . .

. . . . . . . . . . . . . . . . . . . xxiii Pricing bonds with European call options . . . . . . . twenty-six ii VI Conclusion xxix Appendix A: Matlab programme for pricing the zero-coupon bond without option (Fig. 1) A ppendix B: Matlab programme for pricing 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 function 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 select a full essay, order it on our website: OrderCustomPaper.com

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