Bond pricing and the term structure of interest rates

@inproceedings{Heath1989BondPA,
  title={Bond pricing and the term structure of interest rates},
  author={David Heath and Robert A. Jarrow and A. J. Morton},
  year={1989}
}
This paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates. The methodology, based on the equivalent martingale measure technique, takes as given an initial forward rate curve and a family of potential stochastic processes for its subsequent movements. A no-arbitrage condition restricts this family of processes, yielding valuation formula for interest rate sensitive contingent claims that do not explicitly depend on the market prices… Expand
A Term Structure Model and the Pricing of Interest Rate Derivative
The paper developes a general arbitrage free model for the term structure of interest rates. The principal model is formulated in a discrete time structure. It differs substantially from theExpand
Liquidity Risk and the Term Structure of Interest Rates
This paper develops an arbitrage-free pricing theory for a term structure of fixed income securities that incorporates liquidity risk. In our model, there is a quantity impact on the term structureExpand
A YIELD-FACTOR MODEL OF INTEREST RATES
This paper presents a consistent and arbitrage-free multifactor model of the term structure of interest rates in which yields at selected fixed maturities follow a parametric muitivariate MarkovExpand
Fundamental Properties of Bond Prices in Models of the Short-Term Rate
This paper develops restrictions that arbitrage-constrained bond prices impose on the short-term rate process in order to be consistent with given dynamic properties of the term-structure of interestExpand
Pricing Contingent Claims on a Risky Asset and Stochastic Interest Rates: A New Discrete Time Approach
This paper presents a new discrete time approach to pricing contingent claims on a risky asset and stochastic interest rates. The term structure of interest rates is modeled so that arbitrage-freeExpand
A survey of stochastic continuous time models of the term structure of interest rates
Abstract This paper provides a detailed survey of the financial economics literature pertaining to the term structure of interest rates. The analysis concentrates exclusively on the application ofExpand
Theory of long-term interest rates
This paper develops a general framework for deriving an arbitrage-free interest rates term structure related to long maturities that are not observed (traded) in the market. The original contributionExpand
A New Approach to the Valuation of Interest Rate Derivatives: Arrow-Debreu Prices Implicit in the Term Structure of Interest Rates
In a complete, arbitrage-free securities market, the value of a discount bond is modeled in terms of the pricing kernel and the transition density function of the spot interest rate process. TheExpand
Term structure of interest rates: The martingale approach
Martingale methods are used to study interest rate risk in a market with two fundamental assets: savings accounts and zero coupon bonds. Discounted prices of bonds have to be a martingale for aExpand
Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation
This paper studies the binomial approximation to the continuous trading term structure model of Heath, Jarrow, and Morton (1987). The discrete time approximation makes the original methodologyExpand
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 22 REFERENCES
A continuous time approach to the pricing of bonds
Abstract This paper develops an arbitrage model of the term structure of interest rates based on the assumptions that the whole term structure at any point in time may be expressed as a function ofExpand
Term structure of interest rates: The martingale approach
Martingale methods are used to study interest rate risk in a market with two fundamental assets: savings accounts and zero coupon bonds. Discounted prices of bonds have to be a martingale for aExpand
Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation
This paper studies the binomial approximation to the continuous trading term structure model of Heath, Jarrow, and Morton (1987). The discrete time approximation makes the original methodologyExpand
Time-Dependent Variance and the Pricing of Bond Options
In this paper, the authors develop a model for valuing debt options which takes into account the changing characteristics of the underlying bond by assuming that the standard deviation of return isExpand
On the feasibility of arbitrage-based option pricing when stochastic bond price processes are involved
Abstract There are many options which are based on interest rate sensitive assets. For example, debt options and currency options are best priced when a stochastic bond price process is included.Expand
Bond Price Dynamics and Options
This paper provides a closed-form, preference-free means of valuing a European call option written on a default-free pure discount bond. Investors may not agree upon a theory of the term structure,Expand
An equilibrium characterization of the term structure
Abstract The paper derives a general form of the term structure of interest rates. The following assumptions are made: (A.1) The instantaneous (spot) interest rate follows a diffusion process; (A.2)Expand
Martingales and stochastic integrals in the theory of continuous trading
This paper develops a general stochastic model of a frictionless security market with continuous trading. The vector price process is given by a semimartingale of a certain class, and the generalExpand
A Multivariate Model of the Term Structure
THE TERM STRUCTURE OF interest rates has a very important role in economic theory. On the macroeconomic level the term structure serves as a key transmission link between the monetary and realExpand
An Exact Bond Option Formula
This paper derives a closed-form solution for European options on pure discount bonds, assuming a mean-reverting Gaussian interest rate model as in Vasicek [8]. The formula is extended to EuropeanExpand
...
1
2
3
...