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Finance[VasicekModel] - define Vasicek interest rate model
Calling Sequence
VasicekModel(, mu, theta, sigma)
Parameters
-
non-negative constant; initial interest rate
mu
non-negative constant; long-running mean
theta
non-negative constant; speed of mean reversion
sigma
non-negative constant; volatility parameter
Description
The VasicekModel command creates a Vasicek model with the specified parameters. Under this model the short-rate process has the following dynamics with respect to the objective measure
where , , , and are non-negative constants.
Compatibility
The Finance[VasicekModel] command was introduced in Maple 15.
For more information on Maple 15 changes, see Updates in Maple 15.
Examples
First define a Vasicek model with parameters , , and .
The following is the corresponding stochastic process.
Here is the corresponding short-rate tree.
See Also
Finance[BlackScholesProcess], Finance[CoxIngersollRossModel], Finance[HullWhiteModel], Finance[OrnsteinUhlenbeckProcess], Finance[PathGenerator], Finance[SamplePath], Finance[ShortRateProcess], Finance[ShortRateTree]
References
Brigo, D., Mercurio, F., Interest Rate Models: Theory and Practice, New York: Springer-Verlag, 2001.
Glasserman, P., Monte Carlo Methods in Financial Engineering, New York: Springer-Verlag, 2004.
Hull, J., Options, Futures, and Other Derivatives, 5th. edition. Upper Saddle River, New Jersey: Prentice Hall, 2003.
Vasicek, O.A., An Equilibrium Characterization of the Term Structure, Journal of Financial Economics, 5 (1977), pp 177-188.
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