On Markov-modulated exponential-affine bond price formulae

Robert J. Elliott; Tak Kuen Siu

doi:10.1080/13504860802015744

On Markov-modulated exponential-affine bond price formulae

Robert J. Elliott, Tak Kuen Siu

Research output: Contribution to journal › Article › peer-review

60 Citations (Scopus)

Abstract

We consider the bond valuation problem when the short rate process is described by a Markovian regime-switching Hull-White model or a Markovian regime-switching Cox-Ingersoll-Ross model. In each of the two short rate models, we establish a Markov-modulated exponential-affine bond price formula with coefficients given in terms of fundamental matrix solutions of linear matrix differential equations.

Original language	English
Pages (from-to)	1-15
Number of pages	15
Journal	Applied Mathematical Finance
Volume	16
Issue number	1
DOIs	https://doi.org/10.1080/13504860802015744
Publication status	Published - 2009
Externally published	Yes

Keywords

Bond valuation
Exponential affine form
Fundamental matrix solution
Regime-switching forward measure

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10.1080/13504860802015744

Cite this

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AB - We consider the bond valuation problem when the short rate process is described by a Markovian regime-switching Hull-White model or a Markovian regime-switching Cox-Ingersoll-Ross model. In each of the two short rate models, we establish a Markov-modulated exponential-affine bond price formula with coefficients given in terms of fundamental matrix solutions of linear matrix differential equations.

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KW - Exponential affine form

KW - Fundamental matrix solution

KW - Regime-switching forward measure

UR - https://www.scopus.com/pages/publications/61649100751

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DO - 10.1080/13504860802015744

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On Markov-modulated exponential-affine bond price formulae

Abstract

Keywords

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