Tagged Questions
1
vote
1answer
138 views
BDT model implementation
I am looking for a nice and readable description of how to implement BDT model: $d log(r(t)) = [\theta(t)-\frac{\sigma'(t)}{\sigma(t)}log(r(t))]dt + \sigma(t) dW$.
I assume I already have ...
0
votes
0answers
36 views
The observed negative interest rates should be modelled as the observed positive ones?
The presently observed negative interest rates for the recently emitted negative interest bonds by France, etc seem to increase in magnitude with the term. This might suggest that their modelling is ...
6
votes
1answer
129 views
Should we apply practical constraints on the distribution of monte carlo paths?
to limit interest rate paths to a 'reasonable' range (if we could define reasonable). Now we calibrate log-normal skew and mean reversion monthly to robust basket of atm swaptions and in and out ...
6
votes
1answer
241 views
How to reduce variance in a Cox-Ingersoll-Ross Monte Carlo simulation?
I am working out a numerical integral for option pricing in which I'm simulating an interest rate process using a Cox-Ingersoll-Ross process. Each step in my Monte Carlo generated path is a ...
