On the Evaluation of Interest Rate Derivatives by Numerical Solution of Term Structure Equation

  • Nail' Makuev HSE University, 20, Myasnitskaya ul., Moscow, 101000, Russia
  • Alexey Shvedov HSE University, 20, Myasnitskaya ul., Moscow, 101000, Russia
Keywords: term structure equation, stochastic interest rate, finite difference method

Abstract

In this work we compare the central difference scheme and so-called mixed scheme that covers the case of dominating convection. We present an example when precision of the mixed scheme is more than ten times higher than that of central difference scheme.

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Published
2011-01-28
How to Cite
MakuevN., & ShvedovA. (2011). On the Evaluation of Interest Rate Derivatives by Numerical Solution of Term Structure Equation. HSE Economic Journal, 15(3), 374-382. Retrieved from https://ej.hse.ru/article/view/29442
Issue
Vol 15 No 3 (2011): HSE Economic Journal
Section
Untitled section