Pricing interest rate derivatives with model risk

被引：0
|
作者：
Hosokawa, Satoshi [1 ]
Matsumoto, Koichi [2 ]
机构：
[1] Kyushu Univ, Grad Sch Econ, Fukuoka, Japan
[2] Kyushu Univ, Fac Econ, Dept Econ Engn, Higashi Ku, 6-19-1 Hakozaki, Fukuoka, Fukuoka 8128581, Japan
来源：
INTERNATIONAL JOURNAL OF FINANCIAL ENGINEERING | 2015年 / 2卷 / 01期
关键词：
Interest rate derivatives; model risk; uncertainty of parameter;
D O I：
10.1142/S2345768615500038
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
This paper studies an interest rate derivative when there is the model risk in an interest rate model. We consider a mean reverting interest rate process whose volatility model is not known. Most of prices of interest rate derivatives cannot be determined uniquely, based on this interest rate model. We study the price bounds of a derivative and propose how to calculate the price bounds by a trinomial model. Further, we analyze the model risk of derivatives and their portfolios numerically.
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页数：18
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