The curious case of backward short rates

A discretisation approach for both backward- and forward-looking interest rate derivatives is proposed

CLICK HERE TO DOWNLOAD THE PDF

Andrei Lyashenko and Yutian Nie discuss how to discretise continuous-time short-rate models in order to properly handle backward-looking interest rate derivatives. They show that the popular discretisation approaches are based on forward-looking one-period rates, making them intrinsically ill-suited to deal with backward-looking rates. They propose a simple backward discretisation approach that is beneficial when dealing with both backward-looking and forward

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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here