A New Uncertain Interest Rate Model with Application to Hibor

A New Uncertain Interest Rate Model with Application to Hibor

This paper proposes a new interest rate model by using uncertain mean-reverting differential equation. Based on the model, the pricing formulas of the zero-coupon bond, the interest rate ceiling and interest rate floor are derived respectively according to Yao-Chen formula. The symmetry appears in m...

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Veröffentlicht in:Symmetry (Basel) 2022-07, Vol.14 (7), p.1344
Hauptverfasser: Liu, Yang, Jing, Huiting, Ye, Tingqing
Format: Artikel
Sprache:eng
Schlagworte:
Differential equations
Floors
Formulas (mathematics)
Formulations
Hypotheses
interest rate
Interest rates
Method of moments
Ordinary differential equations
Parameter estimation
Pricing
symmetry
uncertain differential equation
uncertainty theory
Yield to maturity
Zero coupon bonds
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Zusammenfassung:This paper proposes a new interest rate model by using uncertain mean-reverting differential equation. Based on the model, the pricing formulas of the zero-coupon bond, the interest rate ceiling and interest rate floor are derived respectively according to Yao-Chen formula. The symmetry appears in mathematical formulations of the interest rate ceiling and interest rate floor pricing formula. Furthermore, the model is applied to depict Hong Kong interbank offered rate (Hibor). Finally the parameter estimation by the method of moments and hypothesis test is completed.
ISSN:2073-8994
2073-8994
DOI:10.3390/sym14071344