On pricing of interest rate derivatives
classification
❄️ cond-mat.stat-mech
cond-mat.otherq-fin.ST
keywords
pricinginterestderivativesrateaccountbehaviourdatadiscussed
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At present, there is an explosion of practical interest in the pricing of interest rate (IR) derivatives. Textbook pricing methods do not take into account the leptokurticity of the underlying IR process. In this paper, such a leptokurtic behaviour is illustrated using LIBOR data, and a possible martingale pricing scheme is discussed.
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