14.1 Initial Term Structure


14.1 Initial Term Structure

Following the notation and methodology of Chapter 8 §8.5.1, the initial term structure of interest rates and interest rate volatilities is described by the following variables :

P ( i )

-

time 0 price of a discount bond maturing at time i t ,

R ( i )

-

time 0 (continuously compounded) yield on a discount bond maturing at time i t ,

ƒ R ( i )

-

time 0 volatility of yield R ( i ).




Interest Rate Modelling
Interest Rate Modelling (Finance and Capital Markets Series)
ISBN: 1403934703
EAN: 2147483647
Year: 2004
Pages: 132

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