EFFICIENT PIECEWISE TREES FOR THE GENERALIZED SKEW VASICEK MODEL WITH DISCONTINUOUS DRIFT

ZHUO, XIAOYANG and MENOUKEU-PAMEN, OLIVIER (2017) EFFICIENT PIECEWISE TREES FOR THE GENERALIZED SKEW VASICEK MODEL WITH DISCONTINUOUS DRIFT. International Journal of Theoretical and Applied Finance, 20 (04). p. 1750028. ISSN 0219-0249, 1793-6322

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Abstract

<jats:p> In this paper, we explore two new tree lattice methods, the piecewise binomial tree and the piecewise trinomial tree for both the bond prices and European/American bond option prices assuming that the short rate is given by a generalized skew Vasicek model with discontinuous drift coefficient. These methods build nonuniform jump size piecewise binomial/trinomial tree based on a tractable piecewise process, which is derived from the original process according to a transform. Numerical experiments of bonds and European/American bond options show that our approaches are efficient as well as reveal several price features of our model. </jats:p>

Item Type:	Article
Uncontrolled Keywords:	4901 Applied Mathematics, 3502 Banking, Finance and Investment, 49 Mathematical Sciences, 35 Commerce, Management, Tourism and Services
Depositing User:	Symplectic Admin
Date Deposited:	12 Jun 2017 06:38
Last Modified:	28 Feb 2025 16:07
DOI:	10.1142/s0219024917500285
Related Websites:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3007908

Available Versions of this Item

• Efficient Piecewise Trees for the Generalized Skew Vasicek Model with Discontinuous Drift. (deposited 02 May 2017 06:29)
  • EFFICIENT PIECEWISE TREES FOR THE GENERALIZED SKEW VASICEK MODEL WITH DISCONTINUOUS DRIFT. (deposited 12 Jun 2017 06:38) [Currently Displayed]