Valuation of stochastic interest rate securities with time dependent variance

  • Talk

  • Javier Villarroel
  • Departamento de Estadística, Universidad de Salamanca
  • April 24, 2006, 2:30 p.m.
  • Sala Multiusos, Ed. Cientifíco-Técnico
  • Announcement file

We consider the problem of how to price general securities whose payoff at maturity only depends on the terminal value of the interest rate r_t whenever the evolution of r_t is given by Feller\'s stochastic differential eq. with time dependent coefficients and the payoff is arbitrary. The solution to this problem is given in terms of the propagator for the heat operator with a potential. This propagator is constructed in terms of a classical harmonic oscillator with time dependent frequency.


Contact details:

Damià Gomila

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