Description Usage Arguments Value Note Author(s) References Examples
Simulates the values and yields of zero-coupon bonds when the (annualized ) spot rate (in percent) is modeled by a Ornstein-Uhlenbeck process satisfying dr <- alpha(beta-r)dt + sigma dW, with market price of risk q(r) <- q1+q2 r. The maturities are 1,3,6 and 12 months.
1 | bond.vasicek(alpha, beta, sigma, q1, q2, r0, n, maturities, days = 360)
|
alpha |
Mean-reversion parameter. |
beta |
Long term mean. |
sigma |
Volatility parameter. |
q1 |
Market prime of risk parameter. |
q2 |
Market prime of risk parameter. |
r0 |
Initial rate value. |
n |
Number of periods. |
maturities |
Maturities in years (row vector). |
days |
Days in a year convention (360 default). |
P |
Bond values. |
R |
Annual rate for the bond. |
tau |
Maturities in years. |
Translated from Matlab by David-Shaun Guay (HEC Montreal grant).
Bruno Remillard
Chapter 5 of 'Statistical Methods for Financial Engineering, B. Remillard, CRC Press, (2013).
1 | out = bond.vasicek(0.5,2.55,0.365,0.3,0,3.55,1080,c(1/12, 3/12, 6/12, 1),365);
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