Pricing of Bond Options: Unspanned Stochastic Volatility and Random Field Models

Description: Pricing of Bond Options by Detlef Repplinger The USV models postulate a correlation between the bond price dynamics and the subordinated stochastic volatility process, whereas Random Field models allow for a deterministic correlation structure between bond prices of different terms. FORMAT Paperback LANGUAGE English CONDITION Brand New Publisher Description A major theme of this book is the development of a consistent unified model framework for the evaluation of bond options. In general options on zero bonds (e.g. caps) and options on coupon bearing bonds (e.g. swaptions) are linked by no-arbitrage relations through the correlation structure of interest rates. Therefore, unspanned stochastic volatility (USV) as well as Random Field (RF) models are used to model the dynamics of entire yield curves. The USV models postulate a correlation between the bond price dynamics and the subordinated stochastic volatility process, whereas Random Field models allow for a deterministic correlation structure between bond prices of different terms. Then the pricing of bond options is done either by running a Fractional Fourier Transform or by applying the Integrated Edgeworth Expansion approach. The latter is a new extension of a generalized series expansion of the (log) characteristic function, especially adapted for the computation of exercise probabilities. Back Cover RWT Award 2008! For his excellent monograph, Detlef Repplinger won the RWT Reutlinger Wirtschaftstreuhand GMBH award in June 2008. A major theme of this book is the development of a consistent unified model framework for the evaluation of bond options. In general options on zero bonds (e.g. caps) and options on coupon bearing bonds (e.g. swaptions) are linked by no-arbitrage relations through the correlation structure of interest rates. Therefore, unspanned stochastic volatility (USV) as well as Random Field (RF) models are used to model the dynamics of entire yield curves. The USV models postulate a correlation between the bond price dynamics and the subordinated stochastic volatility process, whereas Random Field models allow for a deterministic correlation structure between bond prices of different terms. Then the pricing of bond options is done either by running a Fractional Fourier Transform or by applying the Integrated Edgeworth Expansion approach. The latter is a new extension of a generalized series expansion of the (log) characteristic function, especially adapted for the computation of exercise probabilities. Table of Contents The option pricing framework.- The Edgeworth Expansion.- The Integrated Edgeworth Expansion.- Multi-Factor HJM models.- Multiple-Random Fields term structure models.- Multi-factor USV term structure model.- Conclusions.- Matlab codes for the EE and IEE. Long Description A major theme of this book is the development of a consistent unified model framework for the evaluation of bond options. In general options on zero bonds (e.g. caps) and options on coupon bearing bonds (e.g. swaptions) are linked by no-arbitrage relations through the correlation structure of interest rates. Therefore, unspanned stochastic volatility (USV) as well as Random Field (RF) models are used to model the dynamics of entire yield curves. The USV models postulate a correlation between the bond price dynamics and the subordinated stochastic volatility process, whereas Random Field models allow for a deterministic correlation structure between bond prices of different terms. Then the pricing of bond options is done either by running a Fractional Fourier Transform or by applying the Integrated Edgeworth Expansion approach. The latter is a new extension of a generalized series expansion of the (log) characteristic function, especially adapted for the computation of exercise probabilities. Feature Includes supplementary material: sn.pub/extras Details ISBN3540707212 Author Detlef Repplinger Short Title PRICING OF BOND OPTIONS Language English ISBN-10 3540707212 ISBN-13 9783540707219 Media Book Format Paperback DEWEY 332 Series Number 615 Year 2008 Imprint Springer-Verlag Berlin and Heidelberg GmbH & Co. K Place of Publication Berlin Country of Publication Germany Subtitle Unspanned Stochastic Volatility and Random Field Models Edition 2008th DOI 10.1007/978-3-540-70729-5 Pages 138 Publisher Springer-Verlag Berlin and Heidelberg GmbH & Co. KG Edition Description 2008 ed. Series Lecture Notes in Economics and Mathematical Systems Publication Date 2008-09-02 Audience Professional & Vocational Illustrations 23 Illustrations, black and white; X, 138 p. 23 illus. We've got this At The Nile, if you're looking for it, we've got it. With fast shipping, low prices, friendly service and well over a million items - you're bound to find what you want, at a price you'll love! TheNile_Item_ID:96300405;

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