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On Pricing of Interest Rate Derivatives

Date

Authors

Di Matteo, Tiziana

Airoldi, M

Scalas, Enrico

Publisher

Elsevier

Abstract

At present, there is an explosion of practical interest in the pricing of interest rate (IR) derivatives. Textbook pricing methods do not take into account the leptokurticity of the underlying IR process. In this paper, such a leptokurtic behavior is illustrated using London interbank offered rate data, and a possible martingale pricing scheme is discussed.

Keywords

Keywords: Data reduction; Finance; Industrial economics; International trade; Mathematical models; Mathematical operators; Probability density function; Random processes; Risk assessment; Derivative pricing; Econophysics; Interest rate; Financial data processing Derivative pricing; Econophysics; Interest rate

URI

http://hdl.handle.net/1885/77456

Collections

Open Access Research

Source

Physica A: Statistical mechanics and its applications

Type

Journal article

DOI

10.1016/j.physa.2004.03.042