Numerical Simulation of the Term Structure of Interest Rates Using a Random Yield

McDonald, Stuart and Beard, Rodney (2002) Numerical Simulation of the Term Structure of Interest Rates Using a Random Yield. Discussion Paper No. 313, School of Economics, The University of Queensland.

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Author McDonald, Stuart
Beard, Rodney
Title Numerical Simulation of the Term Structure of Interest Rates Using a Random Yield
School, Department or Centre School of Economics
Institution The University of Queensland
Report Number Discussion Paper No. 313
Publication date 2002-08-01
Subject 340203 Finance Economics
340401 Economic Models and Forecasting
Abstract/Summary In this paper, we simulate the term structure of interest rates, where the yield curve is based on forward rates which are modelled as a random field. Term structure models based on random fields offer an improvement on yield curve models based on stochastic differential equations, because they do not require recalibration. In the literature, results concerning random field models of interest rates have been entirely theoretical and have not discussed the implications for yield curve modelling. The simulation results presented in this paper, to the best of our knowledge, are the first numerical results for random field based interest rates and yield curve models.
Keyword interest rates
term structure models
yield curve
random field models
yield curve modelling

Document type: Department Technical Report
Collection: Discussion Papers (School of Economics)
 
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Created: Wed, 14 Jul 2004, 10:00:00 EST by Belinda Weaver (EA)