2001•Journal of systems engineeringRequires access

Studies on pricing models of interest rate derivative products

Zheng Xiao

Abstract

Analyses the limitation of Black Scholes model for the pricing of interest rate derivative products. Based upon the study of interest rate's characteristics and factors affecting interest rate, a kind of stochastic model on interest rate is presented. Using no arbitrage principle, the pricing model of bond and interest rate derivative products is derived.

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Available abstract

Key concepts: Interest rate derivative, Interest rate, Short-rate model, Derivative (finance), Rendleman–Bartter model, Rational pricing, Econometrics, Interest rate risk