An Analytic Approximation Formula for Pricing Zero-Coupon Bonds

Finance Research Letters 4 (2007) 116-126, 1997

Posted: 31 Mar 2013

See all articles by Youngsoo Choi

Youngsoo Choi

Hankuk University of Foreign Studies

Tony S. Wirjanto

University of Waterloo - School of Accounting and Finance; University of Waterloo, Department of Statistics & Actuarial Science

Date Written: 1997

Abstract

This paper presents an analytic approximation formula for pricing zero-coupon bonds, when the dynamics of the short-term interest rate are driven by a one-factor mean-reverting process in which changes in the volatility of the interest rate are a function of the level of the interest rate.

Keywords: One-factor model, Zero-coupon bond, Approximate price, True price

JEL Classification: C02, C65, E43, G12

Suggested Citation

Choi, Youngsoo and Wirjanto, Tony S., An Analytic Approximation Formula for Pricing Zero-Coupon Bonds (1997). Finance Research Letters 4 (2007) 116-126, 1997, Available at SSRN: https://ssrn.com/abstract=2241816

Youngsoo Choi

Hankuk University of Foreign Studies ( email )

89 Wangsan-ri, Mohyeon-myeon, Cheoin-gu
Yongin-shi, Kyonggi-do 449-791
Korea, Republic of (South Korea)

Tony S. Wirjanto (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)

HOME PAGE: http://https://uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

University of Waterloo, Department of Statistics & Actuarial Science ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)
519-746-1875 (Fax)

HOME PAGE: http://math.uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

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