Paper #191

Títol:

On the term structure of Interbank interest rates: Jump-diffusion processes and option pricing

Autors:

Manuel Moreno i Juan I. Peña

Data:

Novembre 1996

Resum:

In this paper we study the dynamic behavior of the term structure of Interbank interest rates and the pricing of options on interest rate sensitive securities. We posit a generalized single factor model with jumps to take into account external influences in the market. Daily data is used to test for jump effects. Qualitative examination of the linkage between Monetary Authorities' interventions and jumps are studied. Pricing results suggests a systematic underpricing in bonds and call options if the jumps component is not included. However, the pricing of put options on bonds presents indeterminacies.

Paraules clau:

Jump-diffusion processes, interbank interest rates, option pricing

Codis JEL:

C51, E43, G12

Àrea de Recerca:

Finances i Comptabilitat

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