AGGREGATION ANALYSIS IN PEDERSEN- SHIU- THORLACIUS MODEL

• Authors: Utkin Joanna
• Languages of publication: EN

Abstracts

EN

The Klaassen aggregation enable us to reduce a binomial lattice of prices into two-point one-period model with larger period and it is consistent with the risk-neutral pricing principle. In general the aggregation is a computing backward procedure. Nevertheless in case of the Pedersen-Shiu-Thorlacius term structure model (which is the generalization of the Ho-Lee model) the analytical aggregation is possible. In the paper the bond prices and the pseudoprobabilities are obtained in the analytical forms. In the aggregated model the bond prices are proved to be restricted to an interval. Also the aggregated perturbation functions are deduced and they are compared to the perturbation functions in the one-period model. .

Keywords

EN

AGGREGATION; TERM STRUCTURE

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Warsaw School of Economics, Collegium of Economic Analysis
• Journal: Roczniki Kolegium Analiz Ekonomicznych
• Year: 2008
• Volume: 18
• Pages: 183-191
• Document type: ARTICLE

Contributors

author

Utkin Joanna

• Joanna Utkin, Szkola Glówna Handlowa w Warszawie, al. Niepodleglosci 164, 02-554 Warszawa, Poland

Identifiers

CEJSH db identifier

09PLAAAA061628