smq/directoryAn evolving quant resource archive
Back to directoryResource
Paper / 2024SMQ / 105252061758662
Interest rate derivatives in a CTMC setting: pricing, replication and Ross recovery
Matthew Lorig / Tim Leung
derivatives / fixed incomeResource overview

Interest rate derivatives in a CTMC setting: pricing, replication and Ross recovery

Paper2024

by Matthew Lorig, Tim Leung

Tags
derivativesfixed incomeinterest ratesstochastic processes

Access resource

Open original source Understand this paper

Continue on SelfMadeQuant

Understand this paper

Suggested foundations for rates and fixed income and stochastic processes and pricing. Specialist prerequisites vary by paper.

Before you read

  1. The Bank Account, Short Rate, and the Fundamental Pricing Equation

    Understand discounting in a stochastic-rate model.

  2. DV01, Dollar Duration, and One-Factor Price Sensitivity

    Translate yield movements into first-order price risk.

  3. Conditional Expectation

    Understand what it means to condition on current information.

  4. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow Brownian dynamics and the second-order term in Itô calculus.

Go further

  1. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

  2. The Vasicek Model: Mean Reversion, Affine Bond Prices, and the Gaussian Distribution

    Study a tractable mean-reverting rate model.

  3. Market Model and Risk-Neutral Valuation

    Connect stochastic dynamics to no-arbitrage prices.

Explore a related reading path

Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Fixed Income and Interest-Rate Models Explore Derivatives Pricing and Computational Finance

Keep exploring

Related resources

More ideas from similar topics.

6

From the same author

Matthew Lorig, Tim Leung

6