A Simple Analytic Approximation Formula for the Bond Price in the Chan-Karolyi-Longstaff-Sanders Mod
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@Article{IJNAMB-4-224,
author = {BE ́ATA STEHL ́IKOV ́A},
title = {A Simple Analytic Approximation Formula for the Bond Price in the Chan-Karolyi-Longstaff-Sanders Mod},
journal = {International Journal of Numerical Analysis Modeling Series B},
year = {2013},
volume = {4},
number = {3},
pages = {224--234},
abstract = {We propose an analytic approximation formula for pricing zero-coupon bonds in the case when the short-term interest rate is driven by a one-factor mean-reverting process with a
volatility proportional to the power the interest rate itself. We derive its order of accuracy.
Afterwards, we suggest its use in calibration and show that it can be reduced to a simple optimization
problem. To test the calibration methodology, we use the simulated data from the Cox-Ingersoll-
Ross model where the exact bond prices can be computed. We show that using the approximation
in the calibration recovers the parameters with a high precision.},
issn = {},
doi = {https://doi.org/},
url = {http://global-sci.org/intro/article_detail/ijnamb/255.html}
}
TY - JOUR
T1 - A Simple Analytic Approximation Formula for the Bond Price in the Chan-Karolyi-Longstaff-Sanders Mod
AU - BE ́ATA STEHL ́IKOV ́A
JO - International Journal of Numerical Analysis Modeling Series B
VL - 3
SP - 224
EP - 234
PY - 2013
DA - 2013/04
SN - 4
DO - http://doi.org/
UR - https://global-sci.org/intro/article_detail/ijnamb/255.html
KW - one-factor interest rate model
KW - Vasicek model
KW - bond price
KW - analytical approximation formula
KW - order of accuracy
KW - calibration
AB - We propose an analytic approximation formula for pricing zero-coupon bonds in the case when the short-term interest rate is driven by a one-factor mean-reverting process with a
volatility proportional to the power the interest rate itself. We derive its order of accuracy.
Afterwards, we suggest its use in calibration and show that it can be reduced to a simple optimization
problem. To test the calibration methodology, we use the simulated data from the Cox-Ingersoll-
Ross model where the exact bond prices can be computed. We show that using the approximation
in the calibration recovers the parameters with a high precision.
BE ́ATA STEHL ́IKOV ́A. (1970). A Simple Analytic Approximation Formula for the Bond Price in the Chan-Karolyi-Longstaff-Sanders Mod.
International Journal of Numerical Analysis Modeling Series B. 4 (3).
224-234.
doi:
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