Pricing of discount bonds with a Markov switching regime

Date

2014

Authors

Elliott, R.
Nishide, K.

Editors

Advisors

Journal Title

Journal ISSN

Volume Title

Type:

Journal article

Citation

Annals of Finance, 2014; 10(3):509-522

Statement of Responsibility

Robert J. Elliott, Katsumasa Nishide

Conference Name

DOI

10.1007/s10436-013-0244-3

Abstract

We consider a Markov switching regime and price a discount bond using a CIR-type short rate model. An explicit formula is obtained for the bond price which includes the solution of a matrix ODE. Our model is easy to calculate and captures the effect of regime uncertainty in the price and term structure.

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Dissertation Note

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© Springer-Verlag Berlin Heidelberg 2013

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Published Version

https://doi.org/10.1007/s10436-013-0244-3

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Persistent link to this record

http://hdl.handle.net/2440/94296