Arbitrage-Free Interpolation in Models of Market Observable Interest Rates

Erik Schl\"ogl
Authors registered in the RePEc Author Service: Erik Schlogl

Abstract: Models which postulate lognormal dynamics for interest rates which are compounded according to market conventions, such as forward LIBOR or forward swap rates, can be constructed initially in a discrete tenor framework. Interpolating interest rates between maturities in the discrete tenor structure is equivalent to extending the model to continuous tenor. The present paper sets forth an alternative way of performing this extension; one which preserves the Markovian properties of the discrete tenor models and guarantees the positivity of all interpolated rates.

Date: 2018-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Schl\"ogl, E. (2002), Arbitrage-Free Interpolation in Models of Market Observable Interest Rates, in K. Sandmann and P. Sch\"onbucher (eds), Advances in Finance and Stochastics, Springer-Verlag

Downloads: (external link)
http://arxiv.org/pdf/1806.08107 Latest version (application/pdf)

Related works:
Working Paper: Arbitrage-Free Interpolation in Models of Market Observable Interest Rates (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1806.08107

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().