Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/44996 
Year of Publication: 
2011
Series/Report no.: 
CPQF Working Paper Series No. 28
Publisher: 
Frankfurt School of Finance & Management, Centre for Practical Quantitative Finance (CPQF), Frankfurt a. M.
Abstract: 
We investigate the characteristic functions of multi-factor Cheyette Models and the application to the valuation of interest rate derivatives. The model dynamic can be classiffied as an affine-diffusion process implying an exponential structure of the characteristic function. The characteristic function is determined by a model specific system of ODEs, that can be solved explicitly for arbitrary Cheyette Models. The necessary transform inversion turns out to be numerically stable as a singularity can be removed. Thus the pricing methodology is reliable and we use it for the calibration of multi-factor Cheyette Models to caps.
Subjects: 
Cheyette Model
Characteristic Function
Fourier Transform
Calibration of Multi-Factor Models
Document Type: 
Working Paper

Files in This Item:
File
Size
904.05 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.