Preprint

Valuation of derivatives based on CKLS interest rate models

Show more…
    1999

36 p.

English The CKLS (1992) short-term risk-free interest rate process leads to valuation model for both default free bonds and contingent claims that can only be solved numerically for the general case. Valuation equations of this nature in the past have been solved using the Crank Nicholson scheme. In this paper, we introduce a new numerical scheme – the Box method, and compare it with the traditional Crank Nicholson scheme. We find that in specific cases of the CKLS process where analytical prices are available, the new scheme leads to more accurate results than the Crank Nicholson scheme.
Language
  • English
Classification
Economics
License
License undefined
Identifiers
  • RERO DOC 9094
Persistent URL
https://susi.usi.ch/usi/documents/318068
Statistics

Document views: 18 File downloads:
  • wp9906.pdf: 3