Continuous time Ehrenfest process in term structure modelling
Pricing of Securities
2010-04-01 v1 Probability
Abstract
In this paper, a finite-state mean-reverting model for the short-rate, based on the continuous time Ehrenfest process, will be examined. Two explicit pricing formulae for zero-coupon bonds will be derived in the general and the special symmetric cases. Its limiting relationship to the Vasicek model will be examined with some numerical results.
Keywords
Cite
@article{arxiv.1003.6042,
title = {Continuous time Ehrenfest process in term structure modelling},
author = {Alexander Kaplun},
journal= {arXiv preprint arXiv:1003.6042},
year = {2010}
}
Comments
20 pages, 6 figures. Submitted to Applied Probability Trust.