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Implied Bond and Derivative Prices Based on Non-Linear Stochastic Interest Rate Models
Nottingham University Business School, Jubilee Campus, Nottingham, UK
Department of Mathematics, University of Dhaka, Dhaka, Bangladesh
- 1 Nottingham University Business School, Jubilee Campus, Nottingham, UK
- 2 Department of Mathematics, University of Dhaka, Dhaka, Bangladesh
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Abstract
In this paper we expand the Box Method of Sorwar et al. (2007) to value both default free bonds and interest rate contingent claims based on one factor non-linear interest rate models. Further we propose a one-factor non-linear interest rate model that incorporates features suggested by recent research. An example shows the extended Box Method works well in practice.
KeywordsStochasticInterest RatesDerivativesBox Method
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