An Analytic Approximation Formula for Pricing Zero-Coupon Bonds
Finance Research Letters 4 (2007) 116-126, 1997
Posted: 31 Mar 2013
Date Written: 1997
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: Suggested Citation