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Pricing Callable Bonds Based on Monte Carlo Simulation Techniques
aculty of Science and Technology, University of Macau, Macao, China
Faculty of Business Administration, University of Macau, Macao, China
Faculty of Business Administration, University of Macau, Macao, China
- 1 aculty of Science and Technology, University of Macau, Macao, China
- 2 Faculty of Business Administration, University of Macau, Macao, China
- 3 Faculty of Business Administration, University of Macau, Macao, China
Technology and Investment·Volume 03 (2012)·Pages 121–125·Published 29 May 2012·DOI10.4236/ti.2012.32015
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Abstract
In this paper, a Monte Carlo method, which is based on some new simulation techniques proposed recently, is presented to numerically price the callable bond with several call dates and notice under the Cox-Ingersoll-Ross (CIR) interest rate model. The corresponding algorithms are also presented to practical callable bond pricing. The numerical experiments show that this method works very well for callable bond under the CIR interest rate model.
KeywordsCallable BondMonte Carlo SimulationCIR ModelEmbedded Option Pricing
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