Autors: Gurova, S.-M., Lazarova, M. D., Gurov, T.
Title: A short-term Interest Rate Extended Merton's Model Influenced by a Risk Market Factor
Keywords: zero-coupon bond, interest rate, stochastic differential equ

Abstract: In the context of the interest rate derivatives, a short-rate model is a mathematical model that can predict the random movement of the interest rates. In the present paper we introduce a short-term interest rate Extended Merton's model for which the movement of the interest rate is given by a stochastic differential equation. For this model we consider the zero-coupon bond's price which is determined by using the apparatus of the stochastic differential equations and the partial differential equations. We use the diffusion equation to calculate the bond's price for this model in the case of a risk market factor and without a risk market factor. Numerical experiments and graphics are presented to determine the zero-coupon bond's price. Results obtained by a Monte Carlo method for evaluation the zero-coupon bond's price in case with the risk market factor is a constant, demonstrate that this stochastic method could be applied in more complicated cases when the risk market factor..

References

    Issue

    AIP Conference Proceedings. 11th International Conference for Promoting the Application of Mathematics in Technical and Natural Sciences, AMiTaNS 2019; Flamingo Grand HotelAlbena; Bulgaria; 20 June 2019 through 25 June 2019, vol. 2164, pp. 120006-1--12006-10, 2019, United States, American Institute of Physics Inc., ISSN 0094-243X

    Copyright Authors

    Full text of the publication

    Цитирания (Citation/s):
    1. Mihova V., Marinova D., Pavlov V., Studying the Impact of Foreign Direct Investments on Bulgaria’s Economic Growth by Sectors, 2026, Springer Proceedings in Mathematics and Statistics, issue 0, vol. 533 PROMS, pp. 349-360, DOI 10.1007/978-3-032-17071-2_29, issn 21941009, eissn 21941017 - 2026 - в издания, индексирани в Scopus

    Вид: статия в списание, публикация в реферирано издание, индексирана в Scopus и Web of Science