A Continuous-Time Model for Reinvestment Risk in Bond Markets

  • Mikkel Dahl
  • Published 2005

Abstract

We propose a bond market model, where, as in practice, only bonds with a limited time to maturity are traded in the market. As time passes, new bonds with stochastic initial prices are introduced in the market. Hence, we are able to model the reinvestment risk present in practice, when considering long term contracts. To quantify and control the… (More)

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