|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26499
|
| Title: | Fixed Income Pricing |
| Authors: | Dai, Qiang
Singleton, Kenneth |
| Issue Date: | 1-Jul-2002 |
| Series/Report no.: | FIN-02-055 |
| Abstract: | This chapter surveys the literature on fixed-income pricing models,
includ- ing dynamic term structure models (DTSMs) and interest rate
sensitive, derivative pricing models. This literature is vast with both
the academic and practitioner communities having proposed a wide variety
of models and model-selection criteria. Central to all pricing models,
implicitly or explic- itly, are: (i) the identity of the state vector:
whether it is latent or observable and, in the latter case, which
observable series; (ii) the law of motion (con- ditional distribution)
of the state vector under the pricing measure; and (iii) the functional
dependence of the short-term interest rate on this state vector. A
primary objective, then, of research on fixed-income pricing has been
the selection of these ingredients to capture relevant features of
history, given the objectives of the modeler, while maintaining
tractability, given available data and computational algorithms.
Accordingly, we overview alternative concep- tual approaches to
fixed-income pricing, highlighting some of the tradeoffs that have
emerged in the literature between the complexity of the proba- bility
model for the state, data availability, the pricing objective, and the
tractability of the resulting model. |
| URI: | http://hdl.handle.net/2451/26499 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
