2007/02/15 by Erik Ekström, Erik Ekstrom, Ekstrom, Erik +2
Computer Science · Economics, Econometrics and Finance · Mathematics · #35B99 #91B28 #Advanced Mathematical Modeling in Engineering #Analysis of PDEs (math.AP) #Applied mathematics #Capital Investment and Risk Analysis #Computational Finance (q-fin.CP) #Convexity #Econometrics #Economics #FOS: Economics and business #FOS: Mathematics #Financial economics #Logarithm #Mathematical analysis #Mathematical economics #Mathematics #Monotonic function #Physics #Probability (math.PR) #Stochastic processes and financial applications #Term (time) #Volatility (finance) #math.AP #math.PR #msc:35B99 #msc:91B28 #q-fin.CP
paper · pdf · doi:10.48550/arxiv.math/0702435
published in arXiv (Cornell University) (Cornell University)
arxiv created 2007/02/15 · openalex publication_date 2007/02/15 · arxiv updated 2009/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
We study convexity and monotonicity properties for prices of bonds and bond options when the short rate is modeled by a diffusion process. We provide conditions under which convexity of the price in the short rate is guaranteed. Under these conditions the price is decreasing in the drift and increasing in the volatility of the short rate. We also study convexity properties of the logarithm of the price.