Magenschab, A. (2008). The potential approach to the term structure of interest rates : theory and application [Diploma Thesis, Technische Universität Wien]. reposiTUm. https://resolver.obvsg.at/urn:nbn:at:at-ubtuw:1-29668
potential approach/ resolvent/ markov chain/ markov process/ yield curve/ term structure/ interest rates/ spot rate/ state price density/ zero bond
en
Abstract:
The main aim of this text is a new approach to the term structure of interest rates called the potential approach. The key element of this approach is to view the state-price density (a positive supermartingale) as the modelling primitive and to express the prices of derivaties directly in terms of this. In this framework prices of zero-bonds are expressed in terms of conditional expectations, which leads us to the concept of modeling with Markov processes. First the theory is presented and then used in a various number of simulations using a Markov process in continuous time with finite state-space and continuous state-space.<br />
de
The main aim of this text is a new approach to the term structure of interest rates called the potential approach. The key element of this approach is to view the state-price density (a positive supermartingale) as the modelling primitive and to express the prices of derivaties directly in terms of this. In this framework prices of zero-bonds are expressed in terms of conditional expectations, which leads us to the concept of modeling with Markov processes. First the theory is presented and then used in a various number of simulations using a Markov process in continuous time with finite state-space and continuous state-space.