Quotation Hochreiter, Ronald, Ch. Pflug, Georg. 2006. Polynomial algorithms for pricing path-dependent interest rate instruments. Computational Economics 28 (3): 291-309.


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Abstract

In this paper we study algorithms for pricing of interest rate instruments using recombining tree (scenario lattice) interest models. The price is defined as expected discounted cash flow. If the cash-flow generated by the instrument depends on the full or partial history of interest rates (pathdependent contracts), then pricing algorithms are typically of exponential complexity. We show that for some models, including product form cash-flows, additive cash-flows, delayed cash-flows and limited path-dependent cash-flows, polynomial pricing algorithms exist

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Computational Economics
Citation Index SSCI
Language English
Title Polynomial algorithms for pricing path-dependent interest rate instruments
Volume 28
Number 3
Year 2006
Page from 291
Page to 309
Reviewed? Y
URL http://homepage.univie.ac.at/Georg.Pflug/science/technicalreports/hp-polyprice.pdf

Associations

People
Hochreiter, Ronald (Details)
External
Ch. Pflug, Georg
Organization
Institute for Statistics and Mathematics IN (Details)
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