2012/10/11 by Guglielmo D'Amico, Guglielmo D’Amico, Raimondo Manca +5
Economics, Econometrics and Finance · Mathematics · #Computational Finance (q-fin.CP) #Credit Risk and Financial Regulations #FOS: Economics and business #FOS: Mathematics #Financial Risk and Volatility Modeling #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Stochastic processes and financial applications #math.PR #q-fin.CP #q-fin.PR
paper · pdf · doi:10.48550/arxiv.1210.3164
arxiv created 2012/10/11 · openalex publication_date 2012/10/11 · arxiv updated 2012/10/12 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this paper we propose a semi-Markov modulated model of interest rates. We assume that the switching process is a semi-Markov process with finite state space E and the modulated process is a diffusive process. We derive recursive equations for the higher order moments of the discount factor and we describe a Monte Carlo al- gorithm to execute simulations. The results are specialized to classical models as those by Vasicek, Hull and White and CIR with a semi-Markov modulation.