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2008•Journal of Gansu SciencesRequires access

The Extended Vasicek Interest Model in Derivative Security Pricing with Its Applications

Jiang Hong

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Abstract

Based on analyzing the Vasicek stochastic interest model,we transform the long-run mean,the fluctuation rate and the mean restoration which are constant into fixed functions about t.In this assumption,we build a new model by solving a partial differential equation based on the Extended Vasicek interest model.Furthermore,we give the bond-pricing formula of discounted bond-choose with a face time T and pay one Yuan by using Ito Lemma and build the constitute of the bond.

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What this paper is about

Based on analyzing the Vasicek stochastic interest model,we transform the long-run mean,the fluctuation rate and the mean restoration which are constant into fixed functions about t.In this assumption,we build a new model by solving a partial differential equation based on the Extended Vasicek interest model.Furthermore,we give the bond-pricing formula of discounted bond-choose with a face time T and pay one Yuan by using Ito Lemma and build the constitute of the bond.

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Available abstract

Based on analyzing the Vasicek stochastic interest model,we transform the long-run mean,the fluctuation rate and the mean restoration which are constant into fixed functions about t.In this assumption,we build a new model by solving a partial differential equation based on the Extended Vasicek interest model.Furthermore,we give the bond-pricing formula of discounted bond-choose with a face time T and pay one Yuan by using Ito Lemma and build the constitute of the bond.

Key concepts: Vasicek model, Interest rate, Short-rate model, Bond, Stochastic differential equation, Lemma (botany), Econometrics, Mathematics

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