Two-factor Black-Karasinski pricing kernel
Analytic formulas for bond prices and forward rates are derived by expanding existing rate models
CLICK HERE TO VIEW THE PDF
Colin Turfus and Alexander Shubert present an analytic pricing kernel for a two-factor Black-Karasinski (lognormal) short-rate model as a rapidly convergent perturbation expansion valid in the limit of low rates. This expansion is used to derive analytic formulas for conditional bond prices and forward rates. The model is equally applicable to modelling credit spreads, and it satisfies the important requirement of guaranteeing positive implied default probabilities
T
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Banking
Investing
From ‘cottage industry’ to quant-ready: prop data at JP Morgan
Unique information now “table stakes” for brokers as they compete for new clients
Receive this by email
Most read on Risk.net
- Duck! Buy side plan to dodge IM rules could backfire
- How to stop stablecoins from hoarding precious collateral
- Credit risk capital models hanging by a thread in the US
- People moves: Credit Suisse reshuffles, CME continues rejig, and more
- From ‘cottage industry’ to quant-ready: prop data at JP Morgan