Price Callable Bonds

C ONTENTS I II Introduction Interest localize 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 feign (1977) . . . . . . . . . . . . . . . The Brennan and Schwartz model (1980) . . . . . . . iv vi vi vii vii vii The Marsh Rosenfeld model (1983) . . . . . . . . . . octad 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 limited Difference Methods IV-A IV-B base knowledge of numerical differentiation . . . . . . . . . . . 14 Types of ?nite diversion methods . . . . . . . . . . . . . . . . . 16 xvii V determine due Bonds V-A determine 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) Append ix 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 lick 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 bum a full essay, order it on our website: OrderCustomPaper.com

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