Abstract.
In this paper we model the instantaneous spot interest rate in a financial market by means of a marked point process with bounded, predictable intensity. The transformed intensity of the point process vanishes when the interest rate leaves a prescribed bounded interval. We show that the pure discount bond price satisfies a partial differential difference equation under the risk-adjusted measure P *. Finally, we perform some numerical simulations of the discount bond price.
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Manuscript received: November 1998/final version received: March 1999
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Elliott, R., Tsoi, A. & Lui, S. Short rate analysis and marked point processes. Mathematical Methods of OR 50, 149–160 (1999). https://doi.org/10.1007/s001860050041
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DOI: https://doi.org/10.1007/s001860050041