Polynomial term structure models
Mathematical Finance
2020-12-24 v3
Abstract
In this article, we explore a class of tractable interest rate models that have the property that the price of a zero-coupon bond can be expressed as a polynomial of a state diffusion process. Our results include a classification of all such time-homogeneous single-factor models in the spirit of Filipovic's maximal degree theorem for exponential polynomial models, as well as an explicit characterisation of the set of feasible parameters in the case when the factor process is bounded. Extensions to time-inhomogeneous and multi-factor polynomial models are also considered.
Cite
@article{arxiv.1504.03238,
title = {Polynomial term structure models},
author = {Si Cheng and Michael R. Tehranchi},
journal= {arXiv preprint arXiv:1504.03238},
year = {2020}
}
Comments
arXiv admin note: substantial text overlap with arXiv:1404.6190