A General Stochastic Volatility Model for the Pricing of Interest Rate Derivatives

• 成果类型: Article
• 署名作者: Trolle, Anders B.; Schwartz, Eduardo S.
• 署名单位: Copenhagen Business School; University of California System; University of California Los Angeles; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhn040
• 发表日期: 2009
• 页码: 2007
• 关键词: term structure models; COUPON-BOND OPTIONS; affine models; Contingent claims; HUMPED VOLATILITY; SWAPTIONS; DYNAMICS; valuation; premia; yields

摘要

We develop a tractable and flexible stochastic volatility multifactor model of the term structure of interest rates. It features unspanned stochastic volatility factors, correlation between innovations to forward rates and their volatilities, quasi-analytical prices of zero-coupon bond options, and dynamics of the forward rate curve, under both the actual and risk-neutral measures, in terms of a finite-dimensional affine state vector. The model has a very good fit to an extensive panel dataset of interest rates, swaptions, and caps. In particular, the model matches the implied cap skews and the dynamics of implied volatilities.