DefaultRisk.com the web's biggest credit risk modeling resource.

Credit Jobs

Home Glossary Links FAQ / About Site Guide Search
pa_price_45


Submit Your Paper

In Rememberance: World Trade Center (WTC)

Export citation to:
- HTML
- Text (plain)
- BibTeX
- RIS
- ReDIF

Heath, David , Robert Jarrow, and Andrew Morton, "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation", Econometrica, Vol. 60, No. 1, (January 1992), pp 77-105.

Abstract: This paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates. The methodology, based on the equivalent martingale measure technique, takes as given an initial forward rate curve and a family of potential stochastic processes for its subsequent movements. A no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk. Examples are provided to illustrate the key results.

Keywords: Term structure of interest rate options, contingent claims, martingale measures.

Previously titled: Bond Pricing and the Term Structure of Interest Rates: A New Methodology

This paper is republished as Ch.3 in...

Books Referenced in this paper:  (what is this?)

Download paper (560K PDF) 30 pages